Correlation Between Johnson Johnson and Sumitomo
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Sumitomo 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 Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Sumitomo, you can compare the effects of market volatilities on Johnson Johnson and Sumitomo 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 Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Sumitomo.
Diversification Opportunities for Johnson Johnson and Sumitomo
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Johnson and Sumitomo is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo 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 Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Sumitomo go up and down completely randomly.
Pair Corralation between Johnson Johnson and Sumitomo
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Sumitomo. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.85 times less risky than Sumitomo. The stock trades about -0.36 of its potential returns per unit of risk. The Sumitomo is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,400 in Sumitomo on January 31, 2024 and sell it today you would earn a total of 259.00 from holding Sumitomo or generate 10.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Johnson Johnson vs. Sumitomo
Performance |
Timeline |
Johnson Johnson |
Sumitomo |
Johnson Johnson and Sumitomo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Johnson Johnson and Sumitomo
The main advantage of trading using opposite Johnson Johnson and Sumitomo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Sumitomo 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 Sumitomo will offset losses from the drop in Sumitomo's long position.Johnson Johnson vs. Amgen Inc | Johnson Johnson vs. Fidelity Freedom Blend | Johnson Johnson vs. Income Fund Of | Johnson Johnson vs. HP 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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