Correlation Between Johnson Johnson and Mountain Valley

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

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

Diversification Opportunities for Johnson Johnson and Mountain Valley

0.67

Correlation Coefficient

Johnson Johnson  Mountain Valley

Poor diversification

The 3 months correlation between Johnson and Mountain is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Mountain Valley MD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Valley MD 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 Mountain Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Valley MD has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Mountain Valley go up and down completely randomly.

Pair Corralation between Johnson Johnson and Mountain Valley

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Mountain Valley. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 12.82 times less risky than Mountain Valley. The stock trades about -0.28 of its potential returns per unit of risk. The Mountain Valley MD is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Mountain Valley MD on September 21, 2024 and sell it today you would lose (0.25) from holding Mountain Valley MD or give up 12.5% 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.  Mountain Valley MD

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.

Mountain Valley MD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mountain Valley MD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental 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 Mountain Valley

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

The idea behind Johnson Johnson and Mountain Valley MD 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.