Correlation Between Johnson Matthey and Croda International

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

Diversification Opportunities for Johnson Matthey and Croda International

0.73

Correlation Coefficient

Johnson Matthey  Croda International

Poor diversification

The 3 months correlation between Johnson and Croda is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey PLC and Croda International Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Croda International Plc 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 Croda International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Croda International Plc has no effect on the direction of Johnson Matthey i.e., Johnson Matthey and Croda International go up and down completely randomly.

Pair Corralation between Johnson Matthey and Croda International

Assuming the 90 days trading horizon Johnson Matthey is expected to generate 19.75 times less return on investment than Croda International. But when comparing it to its historical volatility, Johnson Matthey PLC is 31.62 times less risky than Croda International. It trades about 0.2 of its potential returns per unit of risk. Croda International Plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Croda International Plc on April 22, 2025 and sell it today you would earn a total of  8,667  from holding Croda International Plc or generate 10442.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Johnson Matthey PLC  vs.  Croda International Plc

Johnson Matthey PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Matthey PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Johnson Matthey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Croda International Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Croda International Plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Croda International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Matthey and Croda International

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

The idea behind Johnson Matthey PLC and Croda International 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.