Correlation Between Johnson Matthey and Roebuck Food

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

Diversification Opportunities for Johnson Matthey and Roebuck Food

0.17

Correlation Coefficient

Johnson Matthey  Roebuck Food

Average diversification

The 3 months correlation between Johnson and Roebuck is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Roebuck Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roebuck Food Group 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 Roebuck Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roebuck Food Group has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Roebuck Food go up and down completely randomly.

Pair Corralation between Johnson Matthey and Roebuck Food

Assuming the 90 days trading horizon Johnson Matthey PLC is expected to generate 1.39 times more return on investment than Roebuck Food. However, Johnson Matthey is 1.39 times more volatile than Roebuck Food Group. It trades about 0.08 of its potential returns per unit of risk. Roebuck Food Group is currently generating about -0.03 per unit of risk. If you would invest  138,300  in Johnson Matthey PLC on December 4, 2024 and sell it today you would earn a total of  7,400  from holding Johnson Matthey PLC or generate 5.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Johnson Matthey PLC  vs.  Roebuck Food Group

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.

Roebuck Food Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roebuck Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Roebuck Food is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Johnson Matthey and Roebuck Food

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

The idea behind Johnson Matthey PLC and Roebuck Food Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.