Correlation Between Johnson Matthey and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Johnson Matthey and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Johnson Matthey and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Matthey and Dow Jones.
Diversification Opportunities for Johnson Matthey and Dow Jones
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Johnson and Dow is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey Plc and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Dow Jones go up and down completely randomly.
Pair Corralation between Johnson Matthey and Dow Jones
Assuming the 90 days trading horizon Johnson Matthey Plc is expected to generate 1.65 times more return on investment than Dow Jones. However, Johnson Matthey is 1.65 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.04 per unit of risk. If you would invest 1,599 in Johnson Matthey Plc on December 23, 2024 and sell it today you would earn a total of 48.00 from holding Johnson Matthey Plc or generate 3.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.39% |
Values | Daily Returns |
Johnson Matthey Plc vs. Dow Jones Industrial
Performance |
Timeline |
Johnson Matthey and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
Johnson Matthey Plc
Pair trading matchups for Johnson Matthey
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Johnson Matthey and Dow Jones
The main advantage of trading using opposite Johnson Matthey and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.Johnson Matthey vs. 24SEVENOFFICE GROUP AB | Johnson Matthey vs. OFFICE DEPOT | Johnson Matthey vs. Haverty Furniture Companies | Johnson Matthey vs. ANGI Homeservices |
Dow Jones vs. Flanigans Enterprises | Dow Jones vs. McDonalds | Dow Jones vs. El Pollo Loco | Dow Jones vs. Dominos Pizza Common |
Check out your portfolio center.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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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