Correlation Between Johnson Johnson and Magazine Luiza

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

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

Diversification Opportunities for Johnson Johnson and Magazine Luiza

0.75

Correlation Coefficient

Johnson Johnson  Magazine Luiza

Poor diversification

The 3 months correlation between Johnson and Magazine is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza SA 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 Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Magazine Luiza go up and down completely randomly.

Pair Corralation between Johnson Johnson and Magazine Luiza

Considering the 90-day investment horizon Johnson Johnson is expected to generate 624.01 times less return on investment than Magazine Luiza. But when comparing it to its historical volatility, Johnson Johnson is 68.7 times less risky than Magazine Luiza. It trades about 0.01 of its potential returns per unit of risk. Magazine Luiza SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  111.00  in Magazine Luiza SA on September 18, 2024 and sell it today you would earn a total of  559.00  from holding Magazine Luiza SA or generate 503.6% return on investment over 90 days.

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

Johnson Johnson  vs.  Magazine Luiza SA

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 uncertain 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.

Magazine Luiza SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magazine Luiza SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Johnson Johnson and Magazine Luiza

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

The idea behind Johnson Johnson and Magazine Luiza SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.