Correlation Between Pets At and Johnson Matthey
Can any of the company-specific risk be diversified away by investing in both Pets At and Johnson Matthey 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 Pets At and Johnson Matthey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pets at Home and Johnson Matthey PLC, you can compare the effects of market volatilities on Pets At and Johnson Matthey 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 Pets At with a short position of Johnson Matthey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pets At and Johnson Matthey.
Diversification Opportunities for Pets At and Johnson Matthey
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pets and Johnson is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Pets at Home and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey PLC and Pets At 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 Pets at Home are associated (or correlated) with Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of Pets At i.e., Pets At and Johnson Matthey go up and down completely randomly.
Pair Corralation between Pets At and Johnson Matthey
Assuming the 90 days trading horizon Pets at Home is expected to under-perform the Johnson Matthey. In addition to that, Pets At is 1.19 times more volatile than Johnson Matthey PLC. It trades about -0.06 of its total potential returns per unit of risk. Johnson Matthey PLC is currently generating about -0.02 per unit of volatility. If you would invest 158,629 in Johnson Matthey PLC on October 16, 2024 and sell it today you would lose (27,029) from holding Johnson Matthey PLC or give up 17.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pets at Home vs. Johnson Matthey PLC
Performance |
| Timeline |
| Pets at Home |
| Johnson Matthey PLC |
Pets At and Johnson Matthey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pets At and Johnson Matthey
The main advantage of trading using opposite Pets At and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pets At position performs unexpectedly, Johnson Matthey 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 Johnson Matthey will offset losses from the drop in Johnson Matthey's long position.| Pets At vs. JB Hunt Transport | Pets At vs. Gamma Communications PLC | Pets At vs. Zoom Video Communications | Pets At vs. Mobile Tornado Group |
| Johnson Matthey vs. Take Two Interactive Software | Johnson Matthey vs. Samsung Electronics Co | Johnson Matthey vs. LPKF Laser Electronics | Johnson Matthey vs. Pets at Home |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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