Correlation Between Verizon Communications and JOHNSON

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Can any of the company-specific risk be diversified away by investing in both Verizon Communications and 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 Verizon Communications and JOHNSON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and JOHNSON JOHNSON 485, you can compare the effects of market volatilities on Verizon Communications and 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 Verizon Communications with a short position of JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and JOHNSON.

Diversification Opportunities for Verizon Communications and JOHNSON

VerizonJOHNSONDiversified AwayVerizonJOHNSONDiversified Away100%
0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Verizon and JOHNSON is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and JOHNSON JOHNSON 485 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON 485 and Verizon Communications 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 Verizon Communications are associated (or correlated) with 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 485 has no effect on the direction of Verizon Communications i.e., Verizon Communications and JOHNSON go up and down completely randomly.

Pair Corralation between Verizon Communications and JOHNSON

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.84 times more return on investment than JOHNSON. However, Verizon Communications is 1.19 times less risky than JOHNSON. It trades about 0.23 of its potential returns per unit of risk. JOHNSON JOHNSON 485 is currently generating about 0.06 per unit of risk. If you would invest  3,949  in Verizon Communications on December 2, 2024 and sell it today you would earn a total of  361.00  from holding Verizon Communications or generate 9.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy80.0%
ValuesDaily Returns

Verizon Communications  vs.  JOHNSON JOHNSON 485

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50
JavaScript chart by amCharts 3.21.15VZ 478160BA1
       Timeline  
Verizon Communications 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15JanFebFebMar38394041424344
JOHNSON JOHNSON 485 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days JOHNSON JOHNSON 485 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JOHNSON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15949596979899100101

Verizon Communications and JOHNSON Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.31-2.48-1.65-0.820.010.841.672.513.34 0.10.20.30.4
JavaScript chart by amCharts 3.21.15VZ 478160BA1
       Returns  

Pair Trading with Verizon Communications and JOHNSON

The main advantage of trading using opposite Verizon Communications and JOHNSON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, 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 will offset losses from the drop in JOHNSON's long position.
The idea behind Verizon Communications and JOHNSON JOHNSON 485 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.
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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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