Correlation Between International Business and Johnson Controls

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Can any of the company-specific risk be diversified away by investing in both International Business 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 International Business and Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Johnson Controls International, you can compare the effects of market volatilities on International Business 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 International Business with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Johnson Controls.

Diversification Opportunities for International Business and Johnson Controls

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between International and Johnson is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine 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 International Business 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 International Business Machines 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 International Business i.e., International Business and Johnson Controls go up and down completely randomly.

Pair Corralation between International Business and Johnson Controls

Considering the 90-day investment horizon International Business Machines is expected to generate 0.71 times more return on investment than Johnson Controls. However, International Business Machines is 1.4 times less risky than Johnson Controls. It trades about 0.08 of its potential returns per unit of risk. Johnson Controls International is currently generating about 0.04 per unit of risk. If you would invest  13,414  in International Business Machines on October 4, 2024 and sell it today you would earn a total of  8,486  from holding International Business Machines or generate 63.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.8%
ValuesDaily Returns

International Business Machine  vs.  Johnson Controls International

 Performance 
       Timeline  
International Business 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Johnson Controls Int 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Johnson Controls may actually be approaching a critical reversion point that can send shares even higher in February 2025.

International Business and Johnson Controls Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Johnson Controls

The main advantage of trading using opposite International Business and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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