Correlation Between Dicks Sporting and Johnson Johnson

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

Diversification Opportunities for Dicks Sporting and Johnson Johnson

-0.9
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Dicks and Johnson is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Dicks Sporting 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 Dicks Sporting Goods 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 Dicks Sporting i.e., Dicks Sporting and Johnson Johnson go up and down completely randomly.

Pair Corralation between Dicks Sporting and Johnson Johnson

Considering the 90-day investment horizon Dicks Sporting Goods is expected to under-perform the Johnson Johnson. In addition to that, Dicks Sporting is 3.31 times more volatile than Johnson Johnson. It trades about -0.03 of its total potential returns per unit of risk. Johnson Johnson is currently generating about 0.02 per unit of volatility. If you would invest  16,274  in Johnson Johnson on July 4, 2022 and sell it today you would earn a total of  62.00  from holding Johnson Johnson or generate 0.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dicks Sporting Goods  vs.  Johnson Johnson

 Performance (%) 
       Timeline  
Dicks Sporting Goods 
Dicks Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, Dicks Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Dicks 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 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

Dicks Sporting and Johnson Johnson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dicks Sporting and Johnson Johnson

The main advantage of trading using opposite Dicks Sporting and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting 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.
Dicks Sporting vs. Best Buy Company
The idea behind Dicks Sporting Goods 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.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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