Correlation Between Johnson Matthey and G6 Materials

Can any of the company-specific risk be diversified away by investing in both Johnson Matthey and G6 Materials 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 G6 Materials 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 G6 Materials Corp, you can compare the effects of market volatilities on Johnson Matthey and G6 Materials 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 G6 Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Matthey and G6 Materials.

Diversification Opportunities for Johnson Matthey and G6 Materials

0.44

Correlation Coefficient

Johnson Matthey  G6 Materials

Very weak diversification

The 3 months correlation between Johnson and GPHBF is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and G6 Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G6 Materials Corp 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 G6 Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G6 Materials Corp has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and G6 Materials go up and down completely randomly.

Pair Corralation between Johnson Matthey and G6 Materials

Assuming the 90 days horizon Johnson Matthey is expected to generate 36.93 times less return on investment than G6 Materials. But when comparing it to its historical volatility, Johnson Matthey PLC is 11.73 times less risky than G6 Materials. It trades about 0.07 of its potential returns per unit of risk. G6 Materials Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3.05  in G6 Materials Corp on December 29, 2024 and sell it today you would earn a total of  10.95  from holding G6 Materials Corp or generate 359.02% return on investment over 90 days.

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

Johnson Matthey PLC  vs.  G6 Materials Corp

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 fairly uncertain essential indicators, Johnson Matthey may actually be approaching a critical reversion point that can send shares even higher in April 2025.

G6 Materials Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in G6 Materials Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, G6 Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Matthey and G6 Materials

The main advantage of trading using opposite Johnson Matthey and G6 Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, G6 Materials 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 G6 Materials will offset losses from the drop in G6 Materials' long position.

The idea behind Johnson Matthey PLC and G6 Materials Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.