Correlation Between Johnson Johnson and Entergy

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

Diversification Opportunities for Johnson Johnson and Entergy

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Johnson and Entergy is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy 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 Entergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Entergy go up and down completely randomly.

Pair Corralation between Johnson Johnson and Entergy

Considering the 90-day investment horizon Johnson Johnson is expected to generate 2.89 times less return on investment than Entergy. But when comparing it to its historical volatility, Johnson Johnson is 1.42 times less risky than Entergy. It trades about 0.17 of its potential returns per unit of risk. Entergy is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  10,609  in Entergy on September 10, 2022 and sell it today you would earn a total of  1,091  from holding Entergy or generate 10.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Johnson Johnson  vs.  Entergy

 Performance (%) 
       Timeline  
Johnson Johnson 
Johnson Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly sluggish basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Johnson Price Channel

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

Entergy Price Channel

Johnson Johnson and Entergy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and Entergy

The main advantage of trading using opposite Johnson Johnson and Entergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Entergy 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 Entergy will offset losses from the drop in Entergy's long position.
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The idea behind Johnson Johnson and Entergy 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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