Correlation Between Johnson Matthey and Ondine Biomedical

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

Diversification Opportunities for Johnson Matthey and Ondine Biomedical

0.64

Correlation Coefficient

Johnson Matthey  Ondine Biomedical

Poor diversification

The 3 months correlation between Johnson and Ondine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Ondine Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ondine Biomedical 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 Ondine Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ondine Biomedical has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Ondine Biomedical go up and down completely randomly.

Pair Corralation between Johnson Matthey and Ondine Biomedical

Assuming the 90 days trading horizon Johnson Matthey is expected to generate 6.18 times less return on investment than Ondine Biomedical. But when comparing it to its historical volatility, Johnson Matthey PLC is 3.01 times less risky than Ondine Biomedical. It trades about 0.04 of its potential returns per unit of risk. Ondine Biomedical is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  850.00  in Ondine Biomedical on December 24, 2024 and sell it today you would earn a total of  175.00  from holding Ondine Biomedical or generate 20.59% 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.  Ondine Biomedical

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. 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.

Ondine Biomedical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ondine Biomedical 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, Ondine Biomedical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Matthey and Ondine Biomedical

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

The idea behind Johnson Matthey PLC and Ondine Biomedical 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.