Correlation Between Johnson Matthey and Odfjell Drilling
Can any of the company-specific risk be diversified away by investing in both Johnson Matthey and Odfjell Drilling 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 Matthey and Odfjell Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Matthey PLC and Odfjell Drilling, you can compare the effects of market volatilities on Johnson Matthey and Odfjell Drilling 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 Matthey with a short position of Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Matthey and Odfjell Drilling.
Diversification Opportunities for Johnson Matthey and Odfjell Drilling
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Johnson and Odfjell is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling and Johnson Matthey 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 Matthey PLC are associated (or correlated) with Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Odfjell Drilling go up and down completely randomly.
Pair Corralation between Johnson Matthey and Odfjell Drilling
Assuming the 90 days trading horizon Johnson Matthey PLC is expected to under-perform the Odfjell Drilling. In addition to that, Johnson Matthey is 1.48 times more volatile than Odfjell Drilling. It trades about -0.13 of its total potential returns per unit of risk. Odfjell Drilling is currently generating about -0.06 per unit of volatility. If you would invest 5,115 in Odfjell Drilling on September 4, 2024 and sell it today you would lose (150.00) from holding Odfjell Drilling or give up 2.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Matthey PLC vs. Odfjell Drilling
Performance |
| Timeline |
| Johnson Matthey PLC |
| Odfjell Drilling |
Johnson Matthey and Odfjell Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Matthey and Odfjell Drilling
The main advantage of trading using opposite Johnson Matthey and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, Odfjell Drilling 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 Odfjell Drilling will offset losses from the drop in Odfjell Drilling's long position.| Johnson Matthey vs. Givaudan SA | Johnson Matthey vs. Antofagasta PLC | Johnson Matthey vs. Ferrexpo PLC | Johnson Matthey vs. Atalaya Mining |
| Odfjell Drilling vs. Samsung Electronics Co | Odfjell Drilling vs. Samsung Electronics Co | Odfjell Drilling vs. Hyundai Motor | Odfjell Drilling vs. Toyota Motor Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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