Correlation Between PPL and Johnson Johnson

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

Diversification Opportunities for PPL and Johnson Johnson

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between PPL and Johnson is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding PPL Corp. and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and PPL 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 PPL Corporation 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 PPL i.e., PPL and Johnson Johnson go up and down completely randomly.

Pair Corralation between PPL and Johnson Johnson

Considering the 90-day investment horizon PPL Corporation is expected to generate 1.5 times more return on investment than Johnson Johnson. However, PPL is 1.5 times more volatile than Johnson Johnson. It trades about 0.38 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.28 per unit of risk. If you would invest  2,612  in PPL Corporation on September 3, 2022 and sell it today you would earn a total of  306.00  from holding PPL Corporation or generate 11.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

PPL Corp.  vs.  Johnson Johnson

 Performance (%) 
       Timeline  
PPL Corporation 
PPL Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in PPL Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, PPL is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

PPL 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 conflicting basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Johnson Price Channel

PPL and Johnson Johnson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PPL and Johnson Johnson

The main advantage of trading using opposite PPL and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPL 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.
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The idea behind PPL Corporation 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.
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Johnson Johnson vs. Etsy Inc
Johnson Johnson vs. Anheuser-Busch InBev SANV
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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