Correlation Between Johnson Johnson and Choom Holdings

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

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

Diversification Opportunities for Johnson Johnson and Choom Holdings

0.66

Correlation Coefficient

Johnson Johnson  Choom Holdings

Poor diversification

The 3 months correlation between Johnson and Choom is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Choom Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choom Holdings 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 Choom Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choom Holdings has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Choom Holdings go up and down completely randomly.

Pair Corralation between Johnson Johnson and Choom Holdings

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.11 times more return on investment than Choom Holdings. However, Johnson Johnson is 8.77 times less risky than Choom Holdings. It trades about 0.05 of its potential returns per unit of risk. Choom Holdings is currently generating about -0.08 per unit of risk. If you would invest  14,511  in Johnson Johnson on September 3, 2024 and sell it today you would earn a total of  990.00  from holding Johnson Johnson or generate 6.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.32%
Values	Daily Returns

Johnson Johnson  vs.  Choom Holdings

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 conflicting 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.

Choom Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choom Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Johnson Johnson and Choom Holdings

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

The idea behind Johnson Johnson and Choom Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.