Correlation Between Centaur Media and Johnson Matthey

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

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

Diversification Opportunities for Centaur Media and Johnson Matthey

0.61

Correlation Coefficient

Centaur Media  Johnson Matthey

Poor diversification

The 3 months correlation between Centaur and Johnson is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Centaur Media 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 Centaur Media 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 Centaur Media 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 Centaur Media i.e., Centaur Media and Johnson Matthey go up and down completely randomly.

Pair Corralation between Centaur Media and Johnson Matthey

Assuming the 90 days trading horizon Centaur Media is expected to generate 1.88 times more return on investment than Johnson Matthey. However, Centaur Media is 1.88 times more volatile than Johnson Matthey PLC. It trades about 0.08 of its potential returns per unit of risk. Johnson Matthey PLC is currently generating about 0.05 per unit of risk. If you would invest  2,300  in Centaur Media on December 24, 2024 and sell it today you would earn a total of  300.00  from holding Centaur Media or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Centaur Media  vs.  Johnson Matthey PLC

Centaur Media

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centaur Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Centaur Media exhibited solid returns over the last few months and may actually be approaching a breakup point.

Johnson Matthey PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Matthey PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Johnson Matthey is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Centaur Media and Johnson Matthey

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

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.