Correlation Between Johnson Matthey and Rayonier Advanced

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

Diversification Opportunities for Johnson Matthey and Rayonier Advanced

-0.31

Correlation Coefficient

Johnson Matthey  Rayonier Advanced

Very good diversification

The 3 months correlation between Johnson and Rayonier is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey Plc and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced 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 Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Rayonier Advanced go up and down completely randomly.

Pair Corralation between Johnson Matthey and Rayonier Advanced

Assuming the 90 days trading horizon Johnson Matthey Plc is expected to generate 0.34 times more return on investment than Rayonier Advanced. However, Johnson Matthey Plc is 2.98 times less risky than Rayonier Advanced. It trades about 0.04 of its potential returns per unit of risk. Rayonier Advanced Materials is currently generating about -0.13 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Johnson Matthey Plc  vs.  Rayonier Advanced 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 3 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Rayonier Advanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Johnson Matthey and Rayonier Advanced

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

The idea behind Johnson Matthey Plc and Rayonier Advanced 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.