Correlation Between Ternium SA and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Ternium SA 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 Ternium SA and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ternium SA DRC and Johnson Johnson Co, you can compare the effects of market volatilities on Ternium SA 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 Ternium SA with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ternium SA and Johnson Johnson.
Diversification Opportunities for Ternium SA and Johnson Johnson
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ternium and Johnson is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA DRC and Johnson Johnson Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Ternium SA 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 Ternium SA DRC 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 Ternium SA i.e., Ternium SA and Johnson Johnson go up and down completely randomly.
Pair Corralation between Ternium SA and Johnson Johnson
Assuming the 90 days trading horizon Ternium SA DRC is expected to under-perform the Johnson Johnson. But the stock apears to be less risky and, when comparing its historical volatility, Ternium SA DRC is 1.18 times less risky than Johnson Johnson. The stock trades about -0.04 of its potential returns per unit of risk. The Johnson Johnson Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,156,650 in Johnson Johnson Co on August 27, 2024 and sell it today you would lose (9,150) from holding Johnson Johnson Co or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ternium SA DRC vs. Johnson Johnson Co
Performance |
| Timeline |
| Ternium SA DRC |
| Johnson Johnson |
Ternium SA and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ternium SA and Johnson Johnson
The main advantage of trading using opposite Ternium SA and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ternium SA 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.| Ternium SA vs. United States Steel | Ternium SA vs. Pfizer Inc | Ternium SA vs. Distribuidora de Gas | Ternium SA vs. IRSA Propiedades Comerciales |
| Johnson Johnson vs. Merck Company | Johnson Johnson vs. United States Steel | Johnson Johnson vs. Distribuidora de Gas | Johnson Johnson vs. IRSA Propiedades Comerciales |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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