Correlation Between Tesla and Johnson Johnson

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

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

Diversification Opportunities for Tesla and Johnson Johnson

-0.23

Correlation Coefficient

Tesla  Johnson Johnson

Very good diversification

The 3 months correlation between Tesla and Johnson is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Johnson Johnson CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson CDR and Tesla 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 Tesla Inc CDR 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 CDR has no effect on the direction of Tesla i.e., Tesla and Johnson Johnson go up and down completely randomly.

Pair Corralation between Tesla and Johnson Johnson

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 2.86 times more return on investment than Johnson Johnson. However, Tesla is 2.86 times more volatile than Johnson Johnson CDR. It trades about 0.14 of its potential returns per unit of risk. Johnson Johnson CDR is currently generating about 0.08 per unit of risk. If you would invest  2,252  in Tesla Inc CDR on April 23, 2025 and sell it today you would earn a total of  681.00  from holding Tesla Inc CDR or generate 30.24% return on investment over 90 days.

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

Tesla Inc CDR  vs.  Johnson Johnson CDR

Tesla Inc CDR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Johnson Johnson CDR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Tesla and Johnson Johnson

The main advantage of trading using opposite Tesla and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc CDR and Johnson Johnson CDR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.