Correlation Between Johnson Johnson and Swiss Re

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

By analyzing existing cross correlation between Johnson Johnson and Swiss Re, you can compare the effects of market volatilities on Johnson Johnson and Swiss Re 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 Swiss Re. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Swiss Re.

Diversification Opportunities for Johnson Johnson and Swiss Re

0.46

Correlation Coefficient

Johnson Johnson  Swiss Re

Very weak diversification

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

Pair Corralation between Johnson Johnson and Swiss Re

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.12 times more return on investment than Swiss Re. However, Johnson Johnson is 1.12 times more volatile than Swiss Re. It trades about 0.12 of its potential returns per unit of risk. Swiss Re is currently generating about -0.05 per unit of risk. If you would invest  15,316  in Johnson Johnson on May 6, 2025 and sell it today you would earn a total of  1,417  from holding Johnson Johnson or generate 9.25% return on investment over 90 days.

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

Johnson Johnson  vs.  Swiss Re

Johnson Johnson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Swiss Re

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swiss Re has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Swiss Re is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Johnson Johnson and Swiss Re

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

The idea behind Johnson Johnson and Swiss Re 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.