Correlation Between Johnson Matthey and Axalta Coating

Can any of the company-specific risk be diversified away by investing in both Johnson Matthey and Axalta Coating 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 Axalta Coating 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 Axalta Coating Systems, you can compare the effects of market volatilities on Johnson Matthey and Axalta Coating 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 Axalta Coating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Matthey and Axalta Coating.

Diversification Opportunities for Johnson Matthey and Axalta Coating

0.13

Correlation Coefficient

Johnson Matthey  Axalta Coating

Average diversification

The 3 months correlation between Johnson and Axalta is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey Plc and Axalta Coating Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axalta Coating Systems 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 Axalta Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axalta Coating Systems has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Axalta Coating go up and down completely randomly.

Pair Corralation between Johnson Matthey and Axalta Coating

If you would invest  3,480  in Axalta Coating Systems on September 13, 2024 and sell it today you would earn a total of  441.00  from holding Axalta Coating Systems or generate 12.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Johnson Matthey Plc  vs.  Axalta Coating Systems

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. Despite nearly stable essential indicators, Johnson Matthey is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Axalta Coating Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Axalta Coating sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Matthey and Axalta Coating

The main advantage of trading using opposite Johnson Matthey and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, Axalta Coating 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 Axalta Coating will offset losses from the drop in Axalta Coating's long position.

The idea behind Johnson Matthey Plc and Axalta Coating Systems 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.