Correlation Between Virtus LifeSci and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Virtus LifeSci 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 Virtus LifeSci and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virtus LifeSci Biotech and Johnson Johnson, you can compare the effects of market volatilities on Virtus LifeSci 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 Virtus LifeSci with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus LifeSci and Johnson Johnson.
Diversification Opportunities for Virtus LifeSci and Johnson Johnson
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Virtus and Johnson is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Virtus LifeSci Biotech and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Virtus LifeSci 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 Virtus LifeSci Biotech 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 Virtus LifeSci i.e., Virtus LifeSci and Johnson Johnson go up and down completely randomly.
Pair Corralation between Virtus LifeSci and Johnson Johnson
Considering the 90-day investment horizon Virtus LifeSci Biotech is expected to under-perform the Johnson Johnson. In addition to that, Virtus LifeSci is 1.91 times more volatile than Johnson Johnson. It trades about -0.4 of its total potential returns per unit of risk. Johnson Johnson is currently generating about -0.38 per unit of volatility. If you would invest 15,796 in Johnson Johnson on January 27, 2024 and sell it today you would lose (1,182) from holding Johnson Johnson or give up 7.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Virtus LifeSci Biotech vs. Johnson Johnson
Performance |
| Timeline |
| Virtus LifeSci Biotech |
| Johnson Johnson |
Virtus LifeSci and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virtus LifeSci and Johnson Johnson
The main advantage of trading using opposite Virtus LifeSci and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus LifeSci 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.| Virtus LifeSci vs. Virtus LifeSci Biotech | Virtus LifeSci vs. ALPS Medical Breakthroughs | Virtus LifeSci vs. Loncar Cancer Immunotherapy | Virtus LifeSci vs. First Trust NYSE |
| Johnson Johnson vs. Aquagold International | Johnson Johnson vs. Xponential Fitness | Johnson Johnson vs. Tilray Inc | Johnson Johnson vs. Vanguard Small Cap Growth |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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