Correlation Between Chocoladefabriken and Johnson Matthey
Can any of the company-specific risk be diversified away by investing in both Chocoladefabriken 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 Chocoladefabriken and Johnson Matthey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chocoladefabriken Lindt Spruengli and Johnson Matthey PLC, you can compare the effects of market volatilities on Chocoladefabriken 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 Chocoladefabriken with a short position of Johnson Matthey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chocoladefabriken and Johnson Matthey.
Diversification Opportunities for Chocoladefabriken and Johnson Matthey
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chocoladefabriken and Johnson is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Chocoladefabriken Lindt Spruen 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 Chocoladefabriken 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 Chocoladefabriken Lindt Spruengli 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 Chocoladefabriken i.e., Chocoladefabriken and Johnson Matthey go up and down completely randomly.
Pair Corralation between Chocoladefabriken and Johnson Matthey
Assuming the 90 days trading horizon Chocoladefabriken Lindt Spruengli is expected to under-perform the Johnson Matthey. But the stock apears to be less risky and, when comparing its historical volatility, Chocoladefabriken Lindt Spruengli is 2.36 times less risky than Johnson Matthey. The stock trades about -0.17 of its potential returns per unit of risk. The Johnson Matthey PLC is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 144,797 in Johnson Matthey PLC on September 23, 2024 and sell it today you would lose (11,197) from holding Johnson Matthey PLC or give up 7.73% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Chocoladefabriken Lindt Spruen vs. Johnson Matthey PLC
Performance |
Timeline |
Chocoladefabriken Lindt |
Johnson Matthey PLC |
Chocoladefabriken and Johnson Matthey Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chocoladefabriken and Johnson Matthey
The main advantage of trading using opposite Chocoladefabriken and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chocoladefabriken 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.Chocoladefabriken vs. Uniper SE | Chocoladefabriken vs. Mulberry Group PLC | Chocoladefabriken vs. London Security Plc | Chocoladefabriken vs. Triad Group PLC |
Johnson Matthey vs. Givaudan SA | Johnson Matthey vs. Antofagasta PLC | Johnson Matthey vs. Ferrexpo PLC | Johnson Matthey vs. Atalaya Mining |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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