Correlation Between Wells Fargo and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Wells Fargo 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 Wells Fargo and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Johnson Johnson, you can compare the effects of market volatilities on Wells Fargo 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 Wells Fargo with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Johnson Johnson.
Diversification Opportunities for Wells Fargo and Johnson Johnson
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wells and Johnson is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and Johnson Johnson go up and down completely randomly.
Pair Corralation between Wells Fargo and Johnson Johnson
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.23 times more return on investment than Johnson Johnson. However, Wells Fargo is 1.23 times more volatile than Johnson Johnson. It trades about 0.18 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.25 per unit of risk. If you would invest 5,785 in Wells Fargo on January 21, 2024 and sell it today you would earn a total of 250.00 from holding Wells Fargo or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Johnson Johnson
Performance |
| Timeline |
| Wells Fargo |
| Johnson Johnson |
Wells Fargo and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Johnson Johnson
The main advantage of trading using opposite Wells Fargo and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo 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.| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings |
| Johnson Johnson vs. Alkermes Plc | Johnson Johnson vs. Ironwood Pharmaceuticals | Johnson Johnson vs. Deciphera Pharmaceuticals LLC | Johnson Johnson vs. Eagle Pharmaceuticals |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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