Correlation Between Procter Gamble and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Johnson Johnson at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Procter Gamble and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Procter Gamble and Johnson Johnson, you can compare the effects of market volatilities on Procter Gamble and Johnson Johnson and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Procter Gamble with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Johnson Johnson.
Diversification Opportunities for Procter Gamble and Johnson Johnson
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Procter and Johnson is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding The Procter Gamble and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Procter Gamble is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Procter Gamble are associated (or correlated) with Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Procter Gamble i.e., Procter Gamble and Johnson Johnson go up and down completely randomly.
Pair Corralation between Procter Gamble and Johnson Johnson
Assuming the 90 days horizon Procter Gamble is expected to generate 2.84 times less return on investment than Johnson Johnson. In addition to that, Procter Gamble is 1.42 times more volatile than Johnson Johnson. It trades about 0.09 of its total potential returns per unit of risk. Johnson Johnson is currently generating about 0.35 per unit of volatility. If you would invest 14,383 in Johnson Johnson on November 29, 2024 and sell it today you would earn a total of 1,133 from holding Johnson Johnson or generate 7.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Procter Gamble vs. Johnson Johnson
Performance |
| Timeline |
| Procter Gamble |
| Johnson Johnson |
Procter Gamble and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Johnson Johnson
The main advantage of trading using opposite Procter Gamble and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Johnson Johnson can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.| Procter Gamble vs. RESMINING UNSPADR10 | Procter Gamble vs. Globex Mining Enterprises | Procter Gamble vs. Yanzhou Coal Mining | Procter Gamble vs. Aya Gold Silver |
| Johnson Johnson vs. MICRONIC MYDATA | Johnson Johnson vs. Alliance Data Systems | Johnson Johnson vs. Data Modul AG | Johnson Johnson vs. Lendlease Group |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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