Correlation Between Data Modul and Johnson Controls

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

By analyzing existing cross correlation between Data Modul AG and Johnson Controls International, you can compare the effects of market volatilities on Data Modul and Johnson Controls 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 Data Modul with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data Modul and Johnson Controls.

Diversification Opportunities for Data Modul and Johnson Controls

-0.22

Correlation Coefficient

Data Modul  Johnson Controls

Very good diversification

The 3 months correlation between Data and Johnson is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Data Modul AG and Johnson Controls International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Controls Int and Data Modul 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 Data Modul AG are associated (or correlated) with Johnson Controls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Controls Int has no effect on the direction of Data Modul i.e., Data Modul and Johnson Controls go up and down completely randomly.

Pair Corralation between Data Modul and Johnson Controls

Assuming the 90 days trading horizon Data Modul AG is expected to generate 0.96 times more return on investment than Johnson Controls. However, Data Modul AG is 1.04 times less risky than Johnson Controls. It trades about 0.0 of its potential returns per unit of risk. Johnson Controls International is currently generating about -0.02 per unit of risk. If you would invest  2,700  in Data Modul AG on December 21, 2024 and sell it today you would lose (60.00) from holding Data Modul AG or give up 2.22% of portfolio value over 90 days.

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

Data Modul AG  vs.  Johnson Controls International

Data Modul AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Modul AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Data Modul is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Johnson Controls Int

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Data Modul and Johnson Controls

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

The idea behind Data Modul AG and Johnson Controls International 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.