Correlation Between Microsoft Corp and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp 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 Microsoft Corp and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and Johnson Johnson CDR, you can compare the effects of market volatilities on Microsoft Corp 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 Microsoft Corp with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Johnson Johnson.
Diversification Opportunities for Microsoft Corp and Johnson Johnson
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Johnson is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp 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 Microsoft Corp 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 Microsoft Corp 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 Microsoft Corp i.e., Microsoft Corp and Johnson Johnson go up and down completely randomly.
Pair Corralation between Microsoft Corp and Johnson Johnson
Assuming the 90 days trading horizon Microsoft Corp CDR is expected to under-perform the Johnson Johnson. In addition to that, Microsoft Corp is 1.37 times more volatile than Johnson Johnson CDR. It trades about -0.05 of its total potential returns per unit of risk. Johnson Johnson CDR is currently generating about 0.26 per unit of volatility. If you would invest 2,320 in Johnson Johnson CDR on September 4, 2025 and sell it today you would earn a total of 350.00 from holding Johnson Johnson CDR or generate 15.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft Corp CDR vs. Johnson Johnson CDR
Performance |
| Timeline |
| Microsoft Corp CDR |
| Johnson Johnson CDR |
Microsoft Corp and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and Johnson Johnson
The main advantage of trading using opposite Microsoft Corp and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp 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.| Microsoft Corp vs. Domestic Metals Corp | Microsoft Corp vs. Omineca Mining and | Microsoft Corp vs. Marimaca Copper Corp | Microsoft Corp vs. Aris Mining |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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