Correlation Between Tesla and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Johnson Johnson, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Johnson Johnson.
Diversification Opportunities for Tesla and Johnson Johnson
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tesla and Johnson is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Johnson Johnson go up and down completely randomly.
Pair Corralation between Tesla and Johnson Johnson
Assuming the 90 days trading horizon Tesla Inc is expected to generate 3.03 times more return on investment than Johnson Johnson. However, Tesla is 3.03 times more volatile than Johnson Johnson. It trades about 0.13 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.08 per unit of risk. If you would invest 305,764 in Tesla Inc on September 1, 2024 and sell it today you would earn a total of 394,236 from holding Tesla Inc or generate 128.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Tesla Inc vs. Johnson Johnson
Performance |
| Timeline |
| Tesla Inc |
| Johnson Johnson |
Tesla and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Johnson Johnson
The main advantage of trading using opposite Tesla and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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.| Tesla vs. Deutsche Bank Aktiengesellschaft | Tesla vs. Costco Wholesale | Tesla vs. GMxico Transportes SAB | Tesla vs. Capital One Financial |
| Johnson Johnson vs. DXC Technology | Johnson Johnson vs. New Oriental Education | Johnson Johnson vs. GMxico Transportes SAB | Johnson Johnson vs. McEwen Mining |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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