Correlation Between Pfizer and Johnson Johnson

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

Diversification Opportunities for Pfizer and Johnson Johnson

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Pfizer and Johnson is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Pfizer 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 Pfizer Inc are associated (or correlated) with Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Pfizer i.e., Pfizer and Johnson Johnson go up and down completely randomly.

Pair Corralation between Pfizer and Johnson Johnson

Considering the 90-day investment horizon Pfizer Inc is expected to generate 1.47 times more return on investment than Johnson Johnson. However, Pfizer is 1.47 times more volatile than Johnson Johnson. It trades about 0.13 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.15 per unit of risk. If you would invest  4,537  in Pfizer Inc on September 5, 2022 and sell it today you would earn a total of  554.00  from holding Pfizer Inc or generate 12.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  Johnson Johnson

 Performance (%) 
       Timeline  
Pfizer Inc 
Pfizer Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Pfizer may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Pfizer Price Channel

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

Pfizer and Johnson Johnson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and Johnson Johnson

The main advantage of trading using opposite Pfizer and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.
Pfizer vs. Arbutus Biopharma Corp
Pfizer vs. ACADIA Pharmaceuticals
Pfizer vs. AbbVie Inc
Pfizer vs. Abeona Therapeutics
The idea behind Pfizer Inc and Johnson Johnson 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.
Johnson Johnson vs. Arbutus Biopharma Corp
Johnson Johnson vs. ACADIA Pharmaceuticals
Johnson Johnson vs. AbbVie Inc
Johnson Johnson vs. Abeona Therapeutics
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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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