Correlation Between Procter Gamble and Johnson Johnson

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

Diversification Opportunities for Procter Gamble and Johnson Johnson

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Procter and Johnson is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Procter Gamble 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 Procter Gamble are associated (or correlated) with Johnson 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 has no effect on the direction of Procter Gamble i.e., Procter Gamble and Johnson Johnson go up and down completely randomly.

Pair Corralation between Procter Gamble and Johnson Johnson

Allowing for the 90-day total investment horizon Procter Gamble is expected to under-perform the Johnson Johnson. But the stock apears to be less risky and, when comparing its historical volatility, Procter Gamble is 1.13 times less risky than Johnson Johnson. The stock trades about -0.29 of its potential returns per unit of risk. The Johnson Johnson is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  16,713  in Johnson Johnson on June 26, 2022 and sell it today you would lose (41.00)  from holding Johnson Johnson or give up 0.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Procter Gamble  vs.  Johnson Johnson

 Performance (%) 
       Timeline  
Procter Gamble 
Procter Performance
0 of 100
Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Procter Price Channel

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 sluggish 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

Procter Gamble and Johnson Johnson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Procter Gamble and Johnson Johnson

The main advantage of trading using opposite Procter Gamble and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Johnson 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 Johnson will offset losses from the drop in Johnson Johnson's long position.
Procter Gamble vs. Sigma Lithium Corp
The idea behind Procter Gamble and Johnson Johnson 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.
Johnson Johnson vs. Sigma Lithium Corp
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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