Correlation Between Johnson Matthey and JD Sports
Can any of the company-specific risk be diversified away by investing in both Johnson Matthey and JD Sports 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 JD Sports 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 JD Sports Fashion, you can compare the effects of market volatilities on Johnson Matthey and JD Sports 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 JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Matthey and JD Sports.
Diversification Opportunities for Johnson Matthey and JD Sports
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Johnson and JD Sports is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and JD Sports go up and down completely randomly.
Pair Corralation between Johnson Matthey and JD Sports
Assuming the 90 days trading horizon Johnson Matthey PLC is expected to generate 0.57 times more return on investment than JD Sports. However, Johnson Matthey PLC is 1.74 times less risky than JD Sports. It trades about -0.01 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.05 per unit of risk. If you would invest 149,684 in Johnson Matthey PLC on December 27, 2024 and sell it today you would lose (13,184) from holding Johnson Matthey PLC or give up 8.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Matthey PLC vs. JD Sports Fashion
Performance |
| Timeline |
| Johnson Matthey PLC |
| JD Sports Fashion |
Johnson Matthey and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Matthey and JD Sports
The main advantage of trading using opposite Johnson Matthey and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.| Johnson Matthey vs. Fonix Mobile plc | Johnson Matthey vs. Medical Properties Trust | Johnson Matthey vs. Various Eateries PLC | Johnson Matthey vs. Cairo Communication SpA |
| JD Sports vs. Samsung Electronics Co | JD Sports vs. Samsung Electronics Co | JD Sports vs. Samsung Electronics Co | JD Sports vs. Reliance Industries Ltd |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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