Correlation Between State Bank and Johnson Matthey

Can any of the company-specific risk be diversified away by investing in both State Bank and Johnson Matthey 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 State Bank and Johnson Matthey into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between State Bank of and Johnson Matthey PLC, you can compare the effects of market volatilities on State Bank and Johnson Matthey 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 State Bank with a short position of Johnson Matthey. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Johnson Matthey.

Diversification Opportunities for State Bank and Johnson Matthey

0.1

Correlation Coefficient

State Bank  Johnson Matthey

Average diversification

The 3 months correlation between State and Johnson is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey PLC and State Bank 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 State Bank of are associated (or correlated) with Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of State Bank i.e., State Bank and Johnson Matthey go up and down completely randomly.

Pair Corralation between State Bank and Johnson Matthey

Assuming the 90 days horizon State Bank of is expected to under-perform the Johnson Matthey. In addition to that, State Bank is 1.16 times more volatile than Johnson Matthey PLC. It trades about -0.23 of its total potential returns per unit of risk. Johnson Matthey PLC is currently generating about 0.09 per unit of volatility. If you would invest  1,580  in Johnson Matthey PLC on October 22, 2024 and sell it today you would earn a total of  27.00  from holding Johnson Matthey PLC or generate 1.71% return on investment over 90 days.

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

State Bank of  vs.  Johnson Matthey PLC

State Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Johnson Matthey PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Matthey PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with State Bank and Johnson Matthey

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

The idea behind State Bank of and Johnson Matthey PLC 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 Global Correlations module to find global opportunities by holding instruments from different markets.