Correlation Between Johnson Johnson and Ford

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

Diversification Opportunities for Johnson Johnson and Ford

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Johnson and Ford is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Ford go up and down completely randomly.

Pair Corralation between Johnson Johnson and Ford

Considering the 90-day investment horizon Johnson Johnson is expected to generate 6.29 times less return on investment than Ford. But when comparing it to its historical volatility, Johnson Johnson is 2.68 times less risky than Ford. It trades about 0.03 of its potential returns per unit of risk. Ford Motor is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  680.00  in Ford Motor on May 14, 2022 and sell it today you would earn a total of  903.00  from holding Ford Motor or generate 132.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Johnson Johnson  vs.  Ford Motor

 Performance (%) 
       Timeline  
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 fairly strong basic indicators, Johnson Johnson is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Johnson Price Channel

Ford Motor 
Ford Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

Johnson Johnson and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and Ford

The main advantage of trading using opposite Johnson Johnson and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.
The idea behind Johnson Johnson and Ford Motor 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.
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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