Correlation Between Johnson Matthey and Applied Graphene

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

Diversification Opportunities for Johnson Matthey and Applied Graphene

0.0

Correlation Coefficient

Johnson Matthey  Applied Graphene

Pay attention - limited upside

The 3 months correlation between Johnson and Applied is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Applied Graphene Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Graphene Mat 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 Applied Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Graphene Mat has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Applied Graphene go up and down completely randomly.

Pair Corralation between Johnson Matthey and Applied Graphene

If you would invest  3,337  in Johnson Matthey PLC on December 30, 2024 and sell it today you would earn a total of  186.00  from holding Johnson Matthey PLC or generate 5.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Johnson Matthey PLC  vs.  Applied Graphene Materials

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 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Johnson Matthey may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Applied Graphene Mat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Graphene Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Applied Graphene is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Johnson Matthey and Applied Graphene

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

The idea behind Johnson Matthey PLC and Applied Graphene Materials 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.