Correlation Between Columbia Sportswear and Johnson Matthey

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

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

Diversification Opportunities for Columbia Sportswear and Johnson Matthey

-0.08

Correlation Coefficient

Columbia Sportswear  Johnson Matthey

Good diversification

The 3 months correlation between Columbia and Johnson is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear i.e., Columbia Sportswear and Johnson Matthey go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Johnson Matthey

Assuming the 90 days horizon Columbia Sportswear is expected to under-perform the Johnson Matthey. In addition to that, Columbia Sportswear is 1.37 times more volatile than Johnson Matthey PLC. It trades about -0.12 of its total potential returns per unit of risk. Johnson Matthey PLC is currently generating about 0.04 per unit of volatility. If you would invest  1,580  in Johnson Matthey PLC on December 22, 2024 and sell it today you would earn a total of  49.00  from holding Johnson Matthey PLC or generate 3.1% return on investment over 90 days.

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

Columbia Sportswear  vs.  Johnson Matthey PLC

Columbia Sportswear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Sportswear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Johnson Matthey is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Columbia Sportswear and Johnson Matthey

The main advantage of trading using opposite Columbia Sportswear and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Sportswear 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 Columbia Sportswear 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.