Correlation Between Vaneck Semiconductor and Johnson Johnson

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

Diversification Opportunities for Vaneck Semiconductor and Johnson Johnson

  Correlation Coefficient

Good diversification

The 3 months correlation between Vaneck and Johnson is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vaneck Semiconductor ETF and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Vaneck Semiconductor 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 Vaneck Semiconductor ETF 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 Vaneck Semiconductor i.e., Vaneck Semiconductor and Johnson Johnson go up and down completely randomly.

Pair Corralation between Vaneck Semiconductor and Johnson Johnson

Considering the 90-day investment horizon Vaneck Semiconductor ETF is expected to generate 2.11 times more return on investment than Johnson Johnson. However, Vaneck Semiconductor is 2.11 times more volatile than Johnson Johnson. It trades about 0.02 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.04 per unit of risk. If you would invest  17,781  in Vaneck Semiconductor ETF on June 27, 2022 and sell it today you would earn a total of  1,456  from holding Vaneck Semiconductor ETF or generate 8.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Vaneck Semiconductor ETF  vs.  Johnson Johnson

 Performance (%) 
Vaneck Semiconductor ETF 
Vaneck Performance
0 of 100
Over the last 90 days Vaneck Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Vaneck Price Channel

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 sluggish 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

Vaneck Semiconductor and Johnson Johnson Volatility Contrast

   Predicted Return Density   

Pair Trading with Vaneck Semiconductor and Johnson Johnson

The main advantage of trading using opposite Vaneck Semiconductor and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vaneck Semiconductor 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Vaneck Semiconductor as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Vaneck Semiconductor's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Vaneck Semiconductor's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Vaneck Semiconductor ETF.
The idea behind Vaneck Semiconductor ETF 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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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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