Correlation Between Johnson Matthey and Orica
Can any of the company-specific risk be diversified away by investing in both Johnson Matthey and Orica 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 Orica 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 Orica Limited, you can compare the effects of market volatilities on Johnson Matthey and Orica 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 Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Matthey and Orica.
Diversification Opportunities for Johnson Matthey and Orica
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Johnson and Orica is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited 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 Orica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orica Limited has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Orica go up and down completely randomly.
Pair Corralation between Johnson Matthey and Orica
Assuming the 90 days horizon Johnson Matthey PLC is expected to under-perform the Orica. But the pink sheet apears to be less risky and, when comparing its historical volatility, Johnson Matthey PLC is 1.1 times less risky than Orica. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Orica Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 855.00 in Orica Limited on August 30, 2024 and sell it today you would earn a total of 205.00 from holding Orica Limited or generate 23.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 59.8% |
| Values | Daily Returns |
Johnson Matthey PLC vs. Orica Limited
Performance |
| Timeline |
| Johnson Matthey PLC |
| Orica Limited |
Johnson Matthey and Orica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Matthey and Orica
The main advantage of trading using opposite Johnson Matthey and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, Orica 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 Orica will offset losses from the drop in Orica's long position.| Johnson Matthey vs. Sensient Technologies | Johnson Matthey vs. Koppers Holdings | Johnson Matthey vs. Axalta Coating Systems | Johnson Matthey vs. Select Energy 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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