Correlation Between Johnson Johnson and PTC Therapeutics

Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and PTC 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 PTC 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 PTC Therapeutics, you can compare the effects of market volatilities on Johnson Johnson and PTC 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 PTC Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and PTC Therapeutics.

Diversification Opportunities for Johnson Johnson and PTC Therapeutics

-0.77

Correlation Coefficient

Johnson Johnson  PTC Therapeutics

Pay attention - limited upside

The 3 months correlation between Johnson and PTC is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and PTC Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTC 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 PTC Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTC Therapeutics has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and PTC Therapeutics go up and down completely randomly.

Pair Corralation between Johnson Johnson and PTC Therapeutics

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the PTC Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 4.6 times less risky than PTC Therapeutics. The stock trades about -0.13 of its potential returns per unit of risk. The PTC Therapeutics is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,341  in PTC Therapeutics on September 2, 2024 and sell it today you would earn a total of  1,047  from holding PTC Therapeutics or generate 31.34% 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.  PTC 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.

PTC Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PTC Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, PTC Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and PTC Therapeutics

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

The idea behind Johnson Johnson and PTC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.