Correlation Between Compania and Johnson Johnson

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

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

Diversification Opportunities for Compania and Johnson Johnson

-0.44

Correlation Coefficient

Compania  Johnson Johnson

Very good diversification

The 3 months correlation between Compania and Johnson is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Johnson Johnson Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Compania 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 Compania de Transporte 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 Compania i.e., Compania and Johnson Johnson go up and down completely randomly.

Pair Corralation between Compania and Johnson Johnson

Assuming the 90 days trading horizon Compania de Transporte is expected to generate 2.55 times more return on investment than Johnson Johnson. However, Compania is 2.55 times more volatile than Johnson Johnson Co. It trades about 0.08 of its potential returns per unit of risk. Johnson Johnson Co is currently generating about 0.17 per unit of risk. If you would invest  205,500  in Compania de Transporte on April 22, 2025 and sell it today you would earn a total of  33,000  from holding Compania de Transporte or generate 16.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Compania de Transporte  vs.  Johnson Johnson Co

Compania de Transporte

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania sustained solid returns over the last few months and may actually be approaching a breakup point.

Johnson Johnson

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking indicators, Johnson Johnson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Johnson Johnson

The main advantage of trading using opposite Compania and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania 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 Compania de Transporte and Johnson Johnson Co 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 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.