Correlation Between Johnson Controls and Alpha Pro

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

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

Diversification Opportunities for Johnson Controls and Alpha Pro

-0.74

Correlation Coefficient

Johnson Controls  Alpha Pro

Pay attention - limited upside

The 3 months correlation between Johnson and Alpha is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Alpha Pro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Pro Tech and Johnson Controls 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 Controls International are associated (or correlated) with Alpha Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Pro Tech has no effect on the direction of Johnson Controls i.e., Johnson Controls and Alpha Pro go up and down completely randomly.

Pair Corralation between Johnson Controls and Alpha Pro

Considering the 90-day investment horizon Johnson Controls International is expected to generate 0.63 times more return on investment than Alpha Pro. However, Johnson Controls International is 1.58 times less risky than Alpha Pro. It trades about 0.07 of its potential returns per unit of risk. Alpha Pro Tech is currently generating about -0.07 per unit of risk. If you would invest  7,648  in Johnson Controls International on September 23, 2024 and sell it today you would earn a total of  416.00  from holding Johnson Controls International or generate 5.44% return on investment over 90 days.

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

Johnson Controls International  vs.  Alpha Pro Tech

Johnson Controls Int

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Johnson Controls may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alpha Pro Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Pro Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alpha Pro is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Johnson Controls and Alpha Pro

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

The idea behind Johnson Controls International and Alpha Pro Tech 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.