Correlation Between Johnson Johnson and AGF Management

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

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

Diversification Opportunities for Johnson Johnson and AGF Management

-0.76

Correlation Coefficient

Johnson Johnson  AGF Management

Pay attention - limited upside

The 3 months correlation between Johnson and AGF is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and AGF Management go up and down completely randomly.

Pair Corralation between Johnson Johnson and AGF Management

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the AGF Management. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 2.63 times less risky than AGF Management. The stock trades about -0.13 of its potential returns per unit of risk. The AGF Management Limited is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  582.00  in AGF Management Limited on September 2, 2024 and sell it today you would earn a total of  216.00  from holding AGF Management Limited or generate 37.11% 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.  AGF Management Limited

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.

AGF Management

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, AGF Management reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and AGF Management

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

The idea behind Johnson Johnson and AGF Management Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.