Correlation Between Johnson Johnson and Sound Global

Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Sound Global 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 Johnson Johnson and Sound Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Johnson Johnson and Sound Global, you can compare the effects of market volatilities on Johnson Johnson and Sound Global 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 Johnson Johnson with a short position of Sound Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Sound Global.

Diversification Opportunities for Johnson Johnson and Sound Global

0.0

Correlation Coefficient

Johnson Johnson  Sound Global

Pay attention - limited upside

The 3 months correlation between Johnson and Sound is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Sound Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Global and Johnson Johnson 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 Johnson Johnson are associated (or correlated) with Sound Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Global has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Sound Global go up and down completely randomly.

Pair Corralation between Johnson Johnson and Sound Global

If you would invest  0.00  in Sound Global on February 3, 2024 and sell it today you would earn a total of  0.00  from holding Sound Global or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Johnson Johnson  vs.  Sound Global

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Johnson Johnson is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Sound Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sound Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sound Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Johnson Johnson and Sound Global

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

The idea behind Johnson Johnson and Sound Global 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.