Correlation Between Pfizer and JOHNSON

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

By analyzing existing cross correlation between Pfizer Inc and JOHNSON JOHNSON 245, you can compare the effects of market volatilities on Pfizer and JOHNSON 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 Pfizer with a short position of JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and JOHNSON.

Diversification Opportunities for Pfizer and JOHNSON

0.54

Correlation Coefficient

Pfizer  JOHNSON

Very weak diversification

The 3 months correlation between Pfizer and JOHNSON is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and JOHNSON JOHNSON 245 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON 245 and Pfizer 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 Pfizer Inc are associated (or correlated) with JOHNSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JOHNSON JOHNSON 245 has no effect on the direction of Pfizer i.e., Pfizer and JOHNSON go up and down completely randomly.

Pair Corralation between Pfizer and JOHNSON

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the JOHNSON. In addition to that, Pfizer is 2.55 times more volatile than JOHNSON JOHNSON 245. It trades about -0.12 of its total potential returns per unit of risk. JOHNSON JOHNSON 245 is currently generating about -0.01 per unit of volatility. If you would invest  9,793  in JOHNSON JOHNSON 245 on September 12, 2024 and sell it today you would lose (37.00) from holding JOHNSON JOHNSON 245 or give up 0.38% of portfolio value over 90 days.

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

Pfizer Inc  vs.  JOHNSON JOHNSON 245

Pfizer Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

JOHNSON JOHNSON 245

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JOHNSON JOHNSON 245 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JOHNSON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and JOHNSON

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

The idea behind Pfizer Inc and JOHNSON JOHNSON 245 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.