Correlation Between Johnson Johnson and Profunds-large Cap

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

By analyzing existing cross correlation between Johnson Johnson and Profunds Large Cap Growth, you can compare the effects of market volatilities on Johnson Johnson and Profunds-large Cap 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 Profunds-large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Profunds-large Cap.

Diversification Opportunities for Johnson Johnson and Profunds-large Cap

-0.46

Correlation Coefficient

Johnson Johnson  Profunds-large Cap

Very good diversification

The 3 months correlation between Johnson and Profunds-large is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Profunds Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profunds Large Cap 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 Profunds-large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profunds Large Cap has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Profunds-large Cap go up and down completely randomly.

Pair Corralation between Johnson Johnson and Profunds-large Cap

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Profunds-large Cap. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.41 times less risky than Profunds-large Cap. The stock trades about -0.07 of its potential returns per unit of risk. The Profunds Large Cap Growth is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,232  in Profunds Large Cap Growth on August 15, 2024 and sell it today you would earn a total of  274.00  from holding Profunds Large Cap Growth or generate 8.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Johnson Johnson  vs.  Profunds Large Cap Growth

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 latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Profunds Large Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Large Cap Growth are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Profunds-large Cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Johnson Johnson and Profunds-large Cap

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

The idea behind Johnson Johnson and Profunds Large Cap Growth 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.