Correlation Between Vanguard Small and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Vanguard Small 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 Vanguard Small and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Growth and Johnson Johnson, you can compare the effects of market volatilities on Vanguard Small 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 Vanguard Small with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Johnson Johnson.
Diversification Opportunities for Vanguard Small and Johnson Johnson
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Johnson is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Vanguard Small 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 Vanguard Small Cap Growth 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 Vanguard Small i.e., Vanguard Small and Johnson Johnson go up and down completely randomly.
Pair Corralation between Vanguard Small and Johnson Johnson
Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 0.88 times more return on investment than Johnson Johnson. However, Vanguard Small Cap Growth is 1.13 times less risky than Johnson Johnson. It trades about -0.05 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.06 per unit of risk. If you would invest 8,991 in Vanguard Small Cap Growth on February 8, 2024 and sell it today you would lose (122.00) from holding Vanguard Small Cap Growth or give up 1.36% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Small Cap Growth vs. Johnson Johnson
Performance |
Timeline |
Vanguard Small Cap |
Johnson Johnson |
Vanguard Small and Johnson Johnson Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Small and Johnson Johnson
The main advantage of trading using opposite Vanguard Small and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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.Vanguard Small vs. Vanguard Mid Cap Growth | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard Growth Index | Vanguard Small vs. Vanguard Mid Cap Value |
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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 the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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