Correlation Between Johnson Matthey and Zegona Communications
Can any of the company-specific risk be diversified away by investing in both Johnson Matthey and Zegona Communications 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 Zegona Communications 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 Zegona Communications Plc, you can compare the effects of market volatilities on Johnson Matthey and Zegona Communications 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 Zegona Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Matthey and Zegona Communications.
Diversification Opportunities for Johnson Matthey and Zegona Communications
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Johnson and Zegona is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Zegona Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zegona Communications Plc 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 Zegona Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zegona Communications Plc has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Zegona Communications go up and down completely randomly.
Pair Corralation between Johnson Matthey and Zegona Communications
Assuming the 90 days trading horizon Johnson Matthey PLC is expected to under-perform the Zegona Communications. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Matthey PLC is 4.55 times less risky than Zegona Communications. The stock trades about -0.29 of its potential returns per unit of risk. The Zegona Communications Plc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 32,000 in Zegona Communications Plc on October 15, 2024 and sell it today you would earn a total of 7,600 from holding Zegona Communications Plc or generate 23.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Matthey PLC vs. Zegona Communications Plc
Performance |
| Timeline |
| Johnson Matthey PLC |
| Zegona Communications Plc |
Johnson Matthey and Zegona Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Matthey and Zegona Communications
The main advantage of trading using opposite Johnson Matthey and Zegona Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, Zegona Communications 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 Zegona Communications will offset losses from the drop in Zegona Communications' long position.| Johnson Matthey vs. Empire Metals Limited | Johnson Matthey vs. URU Metals | Johnson Matthey vs. Beowulf Mining | Johnson Matthey vs. Jacquet Metal Service |
| Zegona Communications vs. Metro Bank PLC | Zegona Communications vs. Raymond James Financial | Zegona Communications vs. Synchrony Financial | Zegona Communications vs. Discover Financial Services |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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