Correlation Between Johnson Johnson and XIAOMI

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

By analyzing existing cross correlation between Johnson Johnson and XIAOMI 3375 29 APR 30, you can compare the effects of market volatilities on Johnson Johnson and XIAOMI 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 XIAOMI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and XIAOMI.

Diversification Opportunities for Johnson Johnson and XIAOMI

-0.64

Correlation Coefficient

Johnson Johnson  XIAOMI

Excellent diversification

The 3 months correlation between Johnson and XIAOMI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and XIAOMI 3375 29 APR 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XIAOMI 3375 29 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 XIAOMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XIAOMI 3375 29 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and XIAOMI go up and down completely randomly.

Pair Corralation between Johnson Johnson and XIAOMI

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the XIAOMI. In addition to that, Johnson Johnson is 1.29 times more volatile than XIAOMI 3375 29 APR 30. It trades about -0.27 of its total potential returns per unit of risk. XIAOMI 3375 29 APR 30 is currently generating about -0.29 per unit of volatility. If you would invest  9,341  in XIAOMI 3375 29 APR 30 on September 18, 2024 and sell it today you would lose (199.00) from holding XIAOMI 3375 29 APR 30 or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	19.05%
Values	Daily Returns

Johnson Johnson  vs.  XIAOMI 3375 29 APR 30

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 uncertain performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2025. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

XIAOMI 3375 29

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XIAOMI 3375 29 APR 30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for XIAOMI 3375 29 APR 30 investors.

Pair Trading with Johnson Johnson and XIAOMI

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

The idea behind Johnson Johnson and XIAOMI 3375 29 APR 30 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.