Correlation Between Johnson Johnson and Centerpoint Energy

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

Diversification Opportunities for Johnson Johnson and Centerpoint Energy

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Johnson and Centerpoint is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Centerpoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerpoint Energy 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 Centerpoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerpoint Energy has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Centerpoint Energy go up and down completely randomly.

Pair Corralation between Johnson Johnson and Centerpoint Energy

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.58 times less return on investment than Centerpoint Energy. But when comparing it to its historical volatility, Johnson Johnson is 1.41 times less risky than Centerpoint Energy. It trades about 0.05 of its potential returns per unit of risk. Centerpoint Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,202  in Centerpoint Energy on August 28, 2022 and sell it today you would earn a total of  902.00  from holding Centerpoint Energy or generate 40.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Johnson Johnson  vs.  Centerpoint Energy

 Performance (%) 
       Timeline  
Johnson Johnson 
Johnson Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Johnson Price Channel

Centerpoint Energy 
Centerpoint Performance
0 of 100
Over the last 90 days Centerpoint Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Centerpoint Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the insiders.

Centerpoint Price Channel

Johnson Johnson and Centerpoint Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and Centerpoint Energy

The main advantage of trading using opposite Johnson Johnson and Centerpoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Centerpoint Energy 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 Centerpoint Energy will offset losses from the drop in Centerpoint Energy's long position.
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The idea behind Johnson Johnson and Centerpoint Energy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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