Correlation Between CSPC Pharmaceutical and Johnson Johnson

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

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

Diversification Opportunities for CSPC Pharmaceutical and Johnson Johnson

0.61

Correlation Coefficient

CSPC Pharmaceutical  Johnson Johnson

Poor diversification

The 3 months correlation between CSPC and Johnson is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CSPC Pharmaceutical Group and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and CSPC Pharmaceutical 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 CSPC Pharmaceutical Group 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 CSPC Pharmaceutical i.e., CSPC Pharmaceutical and Johnson Johnson go up and down completely randomly.

Pair Corralation between CSPC Pharmaceutical and Johnson Johnson

Assuming the 90 days horizon CSPC Pharmaceutical Group is expected to generate 3.69 times more return on investment than Johnson Johnson. However, CSPC Pharmaceutical is 3.69 times more volatile than Johnson Johnson. It trades about 0.19 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.22 per unit of risk. If you would invest  81.00  in CSPC Pharmaceutical Group on May 27, 2025 and sell it today you would earn a total of  46.00  from holding CSPC Pharmaceutical Group or generate 56.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

CSPC Pharmaceutical Group  vs.  Johnson Johnson

CSPC Pharmaceutical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CSPC Pharmaceutical Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly sluggish basic indicators, CSPC Pharmaceutical reported solid returns over the last few months and may actually be approaching a breakup point.

Johnson Johnson

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Johnson Johnson revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSPC Pharmaceutical and Johnson Johnson

The main advantage of trading using opposite CSPC Pharmaceutical and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSPC Pharmaceutical 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.

The idea behind CSPC Pharmaceutical Group and Johnson Johnson 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.