Correlation Between SentinelOne and Johnson Johnson

Can any of the company-specific risk be diversified away by investing in both SentinelOne 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 SentinelOne and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SentinelOne and Johnson Johnson, you can compare the effects of market volatilities on SentinelOne 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 SentinelOne with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of SentinelOne and Johnson Johnson.

Diversification Opportunities for SentinelOne and Johnson Johnson

0.8

Correlation Coefficient

SentinelOne  Johnson Johnson

Very poor diversification

The 3 months correlation between SentinelOne and Johnson is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and SentinelOne 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 SentinelOne 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 SentinelOne i.e., SentinelOne and Johnson Johnson go up and down completely randomly.

Pair Corralation between SentinelOne and Johnson Johnson

Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the Johnson Johnson. In addition to that, SentinelOne is 2.05 times more volatile than Johnson Johnson. It trades about -0.16 of its total potential returns per unit of risk. Johnson Johnson is currently generating about 0.11 per unit of volatility. If you would invest  248,377  in Johnson Johnson on February 6, 2024 and sell it today you would earn a total of  5,623  from holding Johnson Johnson or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

SentinelOne  vs.  Johnson Johnson

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Johnson Johnson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SentinelOne and Johnson Johnson

The main advantage of trading using opposite SentinelOne and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne 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 idea behind SentinelOne 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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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 the Transaction History module to view history of all your transactions and understand their impact on performance.