Correlation Between Johnson Matthey and Chocoladefabriken

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

Diversification Opportunities for Johnson Matthey and Chocoladefabriken

0.63

Correlation Coefficient

Johnson Matthey  Chocoladefabriken

Poor diversification

The 3 months correlation between Johnson and Chocoladefabriken is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Chocoladefabriken Lindt Spruen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chocoladefabriken Lindt 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 Chocoladefabriken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chocoladefabriken Lindt has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Chocoladefabriken go up and down completely randomly.

Pair Corralation between Johnson Matthey and Chocoladefabriken

Assuming the 90 days trading horizon Johnson Matthey is expected to generate 1.83 times less return on investment than Chocoladefabriken. In addition to that, Johnson Matthey is 1.24 times more volatile than Chocoladefabriken Lindt Spruengli. It trades about 0.07 of its total potential returns per unit of risk. Chocoladefabriken Lindt Spruengli is currently generating about 0.16 per unit of volatility. If you would invest  10,040,000  in Chocoladefabriken Lindt Spruengli on December 2, 2024 and sell it today you would earn a total of  960,000  from holding Chocoladefabriken Lindt Spruengli or generate 9.56% return on investment over 90 days.

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

Johnson Matthey PLC  vs.  Chocoladefabriken Lindt Spruen

Johnson Matthey PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Matthey PLC are ranked lower than 5 (%) 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.

Chocoladefabriken Lindt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chocoladefabriken Lindt Spruengli are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Chocoladefabriken may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Johnson Matthey and Chocoladefabriken

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

The idea behind Johnson Matthey PLC and Chocoladefabriken Lindt Spruengli 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.