Correlation Between Johnson Johnson and Aclaris Therapeutics

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

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

Diversification Opportunities for Johnson Johnson and Aclaris Therapeutics

-0.78

Correlation Coefficient

Johnson Johnson  Aclaris Therapeutics

Pay attention - limited upside

The 3 months correlation between Johnson and Aclaris is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Aclaris Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aclaris Therapeutics 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 Aclaris Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aclaris Therapeutics has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Aclaris Therapeutics go up and down completely randomly.

Pair Corralation between Johnson Johnson and Aclaris Therapeutics

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Aclaris Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 13.6 times less risky than Aclaris Therapeutics. The stock trades about -0.13 of its potential returns per unit of risk. The Aclaris Therapeutics is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  115.00  in Aclaris Therapeutics on September 2, 2024 and sell it today you would earn a total of  292.00  from holding Aclaris Therapeutics or generate 253.91% return on investment over 90 days.

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

Johnson Johnson  vs.  Aclaris Therapeutics

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 latest weak performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Aclaris Therapeutics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aclaris Therapeutics are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Aclaris Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and Aclaris Therapeutics

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

The idea behind Johnson Johnson and Aclaris Therapeutics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.