Correlation Between Sprott Focus and Johnson Matthey

Can any of the company-specific risk be diversified away by investing in both Sprott Focus 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 Sprott Focus and Johnson Matthey into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sprott Focus Trust and Johnson Matthey PLC, you can compare the effects of market volatilities on Sprott Focus 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 Sprott Focus with a short position of Johnson Matthey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Focus and Johnson Matthey.

Diversification Opportunities for Sprott Focus and Johnson Matthey

-0.82

Correlation Coefficient

Sprott Focus  Johnson Matthey

Pay attention - limited upside

The 3 months correlation between Sprott and Johnson is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust 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 Sprott Focus 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 Sprott Focus Trust 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 Sprott Focus i.e., Sprott Focus and Johnson Matthey go up and down completely randomly.

Pair Corralation between Sprott Focus and Johnson Matthey

Given the investment horizon of 90 days Sprott Focus Trust is expected to generate 0.6 times more return on investment than Johnson Matthey. However, Sprott Focus Trust is 1.67 times less risky than Johnson Matthey. It trades about 0.03 of its potential returns per unit of risk. Johnson Matthey PLC is currently generating about -0.03 per unit of risk. If you would invest  718.00  in Sprott Focus Trust on September 14, 2024 and sell it today you would earn a total of  84.00  from holding Sprott Focus Trust or generate 11.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sprott Focus Trust  vs.  Johnson Matthey PLC

Sprott Focus Trust

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Johnson Matthey PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Matthey PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sprott Focus and Johnson Matthey

The main advantage of trading using opposite Sprott Focus and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Focus 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.

The idea behind Sprott Focus Trust and Johnson Matthey PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.