Correlation Between Visa and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Johnson Johnson, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Johnson Johnson.
Diversification Opportunities for Visa and Johnson Johnson
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Johnson is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Visa 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 Visa Class A 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 Visa i.e., Visa and Johnson Johnson go up and down completely randomly.
Pair Corralation between Visa and Johnson Johnson
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.06 times more return on investment than Johnson Johnson. However, Visa is 1.06 times more volatile than Johnson Johnson. It trades about 0.35 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.0 per unit of risk. If you would invest 28,929 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 2,579 from holding Visa Class A or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Visa Class A vs. Johnson Johnson
Performance |
| Timeline |
| Visa Class A |
| Johnson Johnson |
Visa and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Johnson Johnson
The main advantage of trading using opposite Visa and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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