Correlation Between Johnson Johnson and Coherent

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

Diversification Opportunities for Johnson Johnson and Coherent

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Johnson and Coherent is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Coherent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coherent 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 Coherent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coherent has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Coherent go up and down completely randomly.

Pair Corralation between Johnson Johnson and Coherent

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.28 times more return on investment than Coherent. However, Johnson Johnson is 3.6 times less risky than Coherent. It trades about 0.15 of its potential returns per unit of risk. Coherent is currently generating about -0.02 per unit of risk. If you would invest  16,213  in Johnson Johnson on September 4, 2022 and sell it today you would earn a total of  1,675  from holding Johnson Johnson or generate 10.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Johnson Johnson  vs.  Coherent

 Performance (%) 
       Timeline  
Johnson Johnson 
Johnson Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 11 (%) 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 January 2023.

Johnson Price Channel

Coherent 
Coherent Performance
0 of 100
Over the last 90 days Coherent has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Coherent is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Coherent Price Channel

Johnson Johnson and Coherent Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and Coherent

The main advantage of trading using opposite Johnson Johnson and Coherent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Coherent 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 Coherent will offset losses from the drop in Coherent's long position.
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The idea behind Johnson Johnson and Coherent 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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