Correlation Between Johnson Johnson and Coca Cola

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

Diversification Opportunities for Johnson Johnson and Coca Cola

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Johnson and Coca Cola is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Coca-Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca-Cola has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Coca Cola go up and down completely randomly.

Pair Corralation between Johnson Johnson and Coca Cola

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.03 times more return on investment than Coca Cola. However, Johnson Johnson is 1.03 times more volatile than Coca-Cola. It trades about 0.05 of its potential returns per unit of risk. Coca-Cola is currently generating about -0.35 per unit of risk. If you would invest  16,243  in Johnson Johnson on July 1, 2022 and sell it today you would earn a total of  210.00  from holding Johnson Johnson or generate 1.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Johnson Johnson  vs.  Coca-Cola

 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 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

Coca-Cola 
Coca Cola Performance
0 of 100
Over the last 90 days Coca-Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Coca Cola Price Channel

Johnson Johnson and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and Coca Cola

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

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