Correlation Between Johnson Matthey and Media

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

Diversification Opportunities for Johnson Matthey and Media

0.8

Correlation Coefficient

Johnson Matthey  Media

Very poor diversification

The 3 months correlation between Johnson and Media is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Media and Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media and Games 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 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media and Games has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Media go up and down completely randomly.

Pair Corralation between Johnson Matthey and Media

Assuming the 90 days trading horizon Johnson Matthey is expected to generate 2.92 times less return on investment than Media. But when comparing it to its historical volatility, Johnson Matthey PLC is 2.45 times less risky than Media. It trades about 0.04 of its potential returns per unit of risk. Media and Games is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  318.00  in Media and Games on December 22, 2024 and sell it today you would earn a total of  23.00  from holding Media and Games or generate 7.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Johnson Matthey PLC  vs.  Media and Games

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. Despite nearly stable basic indicators, Johnson Matthey is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Media and Games

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Johnson Matthey and Media

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

The idea behind Johnson Matthey PLC and Media and Games 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.