Correlation Between Applied Graphene and Johnson Matthey

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

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

Diversification Opportunities for Applied Graphene and Johnson Matthey

-0.4

Correlation Coefficient

Applied Graphene  Johnson Matthey

Very good diversification

The 3 months correlation between Applied and Johnson is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Applied Graphene Materials 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 Applied Graphene 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 Applied Graphene Materials 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 Applied Graphene i.e., Applied Graphene and Johnson Matthey go up and down completely randomly.

Pair Corralation between Applied Graphene and Johnson Matthey

If you would invest  0.01  in Applied Graphene Materials on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Applied Graphene Materials or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	62.5%
Values	Daily Returns

Applied Graphene Materials  vs.  Johnson Matthey PLC

Applied Graphene Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Graphene Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Applied Graphene is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Applied Graphene and Johnson Matthey

The main advantage of trading using opposite Applied Graphene and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Graphene 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 Applied Graphene Materials 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.