Correlation Between Johnson Matthey and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Johnson Matthey and Sensient Technologies 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 Sensient Technologies 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 Sensient Technologies, you can compare the effects of market volatilities on Johnson Matthey and Sensient Technologies 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 Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Matthey and Sensient Technologies.
Diversification Opportunities for Johnson Matthey and Sensient Technologies
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and Sensient is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies 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 Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Sensient Technologies go up and down completely randomly.
Pair Corralation between Johnson Matthey and Sensient Technologies
Assuming the 90 days horizon Johnson Matthey PLC is expected to under-perform the Sensient Technologies. In addition to that, Johnson Matthey is 1.14 times more volatile than Sensient Technologies. It trades about -0.03 of its total potential returns per unit of risk. Sensient Technologies is currently generating about 0.02 per unit of volatility. If you would invest 6,985 in Sensient Technologies on August 30, 2024 and sell it today you would earn a total of 724.00 from holding Sensient Technologies or generate 10.37% 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. Sensient Technologies
Performance |
| Timeline |
| Johnson Matthey PLC |
| Sensient Technologies |
Johnson Matthey and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Matthey and Sensient Technologies
The main advantage of trading using opposite Johnson Matthey and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' long position.| Johnson Matthey vs. Sensient Technologies | Johnson Matthey vs. Koppers Holdings | Johnson Matthey vs. Axalta Coating Systems | Johnson Matthey vs. Select Energy Services |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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