Correlation Between Canopy Growth and Johnson Johnson

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

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

Diversification Opportunities for Canopy Growth and Johnson Johnson

-0.74

Correlation Coefficient

Canopy Growth  Johnson Johnson

Pay attention - limited upside

The 3 months correlation between Canopy and Johnson is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Canopy Growth 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 Canopy Growth Corp 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 Canopy Growth i.e., Canopy Growth and Johnson Johnson go up and down completely randomly.

Pair Corralation between Canopy Growth and Johnson Johnson

Considering the 90-day investment horizon Canopy Growth Corp is expected to generate 14.42 times more return on investment than Johnson Johnson. However, Canopy Growth is 14.42 times more volatile than Johnson Johnson. It trades about 0.06 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.07 per unit of risk. If you would invest  916.00  in Canopy Growth Corp on February 9, 2024 and sell it today you would lose (13.00) from holding Canopy Growth Corp or give up 1.42% of portfolio value over 90 days.

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

Canopy Growth Corp  vs.  Johnson Johnson

Canopy Growth Corp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canopy Growth Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Canopy Growth exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. Even with relatively steady basic indicators, Johnson Johnson is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Canopy Growth and Johnson Johnson

The main advantage of trading using opposite Canopy Growth and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canopy Growth 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 Canopy Growth Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.