Correlation Between Johnson Matthey and Albion Technology

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

Diversification Opportunities for Johnson Matthey and Albion Technology

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Johnson and Albion is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Albion Technology General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albion Technology General 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 Albion Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albion Technology General has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Albion Technology go up and down completely randomly.

Pair Corralation between Johnson Matthey and Albion Technology

Assuming the 90 days trading horizon Johnson Matthey PLC is expected to under-perform the Albion Technology. In addition to that, Johnson Matthey is 1.61 times more volatile than Albion Technology General. It trades about -0.13 of its total potential returns per unit of risk. Albion Technology General is currently generating about -0.05 per unit of volatility. If you would invest  6,850  in Albion Technology General on October 5, 2024 and sell it today you would lose (50.00) from holding Albion Technology General or give up 0.73% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.0%
ValuesDaily Returns

Johnson Matthey PLC  vs.  Albion Technology General

 Performance 
       Timeline  
Johnson Matthey PLC 

Risk-Adjusted Performance

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Weak
 
Strong
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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Albion Technology General 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Albion Technology General has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Albion Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Johnson Matthey and Albion Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Matthey and Albion Technology

The main advantage of trading using opposite Johnson Matthey and Albion Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, Albion Technology 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 Albion Technology will offset losses from the drop in Albion Technology's long position.
The idea behind Johnson Matthey PLC and Albion Technology General 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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