Correlation Between Johnson Johnson and B of A

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Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and B of A 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 B of A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Bank Of America, you can compare the effects of market volatilities on Johnson Johnson and B of A 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 B of A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and B of A.

Diversification Opportunities for Johnson Johnson and B of A

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Johnson and B of A is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Bank Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of America 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 B of A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of America has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and B of A go up and down completely randomly.

Pair Corralation between Johnson Johnson and B of A

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.63 times more return on investment than B of A. However, Johnson Johnson is 1.58 times less risky than B of A. It trades about -0.11 of its potential returns per unit of risk. Bank Of America is currently generating about -0.12 per unit of risk. If you would invest  17,391  in Johnson Johnson on July 2, 2022 and sell it today you would lose (938.00)  from holding Johnson Johnson or give up 5.39% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Johnson Johnson  vs.  Bank Of America

 Performance (%) 
       Timeline  
Johnson Johnson 
Johnson Performance
0 of 100
Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Johnson Price Channel

Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Johnson Johnson and B of A Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and B of A

The main advantage of trading using opposite Johnson Johnson and B of A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, B of A 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 B of A will offset losses from the drop in B of A's long position.
Johnson Johnson vs. Amazon Inc
The idea behind Johnson Johnson and Bank Of America 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.
B of A vs. Amazon Inc
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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