Correlation Between Johnson Johnson and Amgen

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

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

Diversification Opportunities for Johnson Johnson and Amgen

0.62

Correlation Coefficient

Johnson Johnson  Amgen

Poor diversification

The 3 months correlation between Johnson and Amgen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Amgen go up and down completely randomly.

Pair Corralation between Johnson Johnson and Amgen

Assuming the 90 days trading horizon Johnson Johnson is expected to generate 0.4 times more return on investment than Amgen. However, Johnson Johnson is 2.48 times less risky than Amgen. It trades about -0.06 of its potential returns per unit of risk. Amgen Inc is currently generating about -0.07 per unit of risk. If you would invest  14,296  in Johnson Johnson on September 26, 2024 and sell it today you would lose (472.00) from holding Johnson Johnson or give up 3.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Johnson Johnson  vs.  Amgen Inc

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. In spite of comparatively stable forward-looking indicators, Johnson Johnson is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Amgen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amgen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Johnson Johnson and Amgen

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

The idea behind Johnson Johnson and Amgen Inc 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.