Correlation Between HUT 8 and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both HUT 8 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 HUT 8 and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HUT 8 P and Johnson Johnson, you can compare the effects of market volatilities on HUT 8 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 HUT 8 with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUT 8 and Johnson Johnson.
Diversification Opportunities for HUT 8 and Johnson Johnson
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HUT and Johnson is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding HUT 8 P and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and HUT 8 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 HUT 8 P 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 HUT 8 i.e., HUT 8 and Johnson Johnson go up and down completely randomly.
Pair Corralation between HUT 8 and Johnson Johnson
Assuming the 90 days horizon HUT 8 P is expected to generate 7.78 times more return on investment than Johnson Johnson. However, HUT 8 is 7.78 times more volatile than Johnson Johnson. It trades about 0.39 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.04 per unit of risk. If you would invest 1,410 in HUT 8 P on August 26, 2024 and sell it today you would earn a total of 1,090 from holding HUT 8 P or generate 77.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HUT 8 P vs. Johnson Johnson
Performance |
| Timeline |
| HUT 8 P |
| Johnson Johnson |
HUT 8 and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HUT 8 and Johnson Johnson
The main advantage of trading using opposite HUT 8 and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUT 8 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.The idea behind HUT 8 P and Johnson Johnson pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Johnson Johnson vs. Pfizer Inc | Johnson Johnson vs. Amgen Inc | Johnson Johnson vs. Bayer AG NA | Johnson Johnson vs. Biogen Inc |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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