Correlation Between Walmart and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Johnson Johnson Co, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Johnson Johnson.
Diversification Opportunities for Walmart and Johnson Johnson
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Walmart and Johnson is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Johnson Johnson Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Walmart 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 Walmart 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 Walmart i.e., Walmart and Johnson Johnson go up and down completely randomly.
Pair Corralation between Walmart and Johnson Johnson
Assuming the 90 days trading horizon Walmart is expected to generate 1.03 times more return on investment than Johnson Johnson. However, Walmart is 1.03 times more volatile than Johnson Johnson Co. It trades about 0.11 of its potential returns per unit of risk. Johnson Johnson Co is currently generating about -0.13 per unit of risk. If you would invest 560,000 in Walmart on November 2, 2024 and sell it today you would earn a total of 85,000 from holding Walmart or generate 15.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.04% |
| Values | Daily Returns |
Walmart vs. Johnson Johnson Co
Performance |
| Timeline |
| Walmart |
| Johnson Johnson |
Walmart and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Johnson Johnson
The main advantage of trading using opposite Walmart and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.| Walmart vs. Compania de Transporte | Walmart vs. Agrometal SAI | Walmart vs. Harmony Gold Mining | Walmart vs. Telecom Argentina |
| Johnson Johnson vs. Transportadora de Gas | Johnson Johnson vs. Harmony Gold Mining | Johnson Johnson vs. Agrometal SAI | Johnson Johnson vs. Compania de Transporte |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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