Correlation Between Johnson Johnson and TGI Solar

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

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

Diversification Opportunities for Johnson Johnson and TGI Solar

0.78

Correlation Coefficient

Johnson Johnson  TGI Solar

Poor diversification

The 3 months correlation between Johnson and TGI is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and TGI Solar Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGI Solar Power and Johnson Johnson 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 Johnson Johnson are associated (or correlated) with TGI Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGI Solar Power has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and TGI Solar go up and down completely randomly.

Pair Corralation between Johnson Johnson and TGI Solar

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the TGI Solar. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 15.84 times less risky than TGI Solar. The stock trades about -0.01 of its potential returns per unit of risk. The TGI Solar Power is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.19  in TGI Solar Power on September 3, 2024 and sell it today you would lose (0.11) from holding TGI Solar Power or give up 57.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.78%
Values	Daily Returns

Johnson Johnson  vs.  TGI Solar Power

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 latest conflicting performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

TGI Solar Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TGI Solar Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Johnson Johnson and TGI Solar

The main advantage of trading using opposite Johnson Johnson and TGI Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, TGI Solar 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 TGI Solar will offset losses from the drop in TGI Solar's long position.

The idea behind Johnson Johnson and TGI Solar Power 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.