Correlation Between Johnson Controls and Azek

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

Diversification Opportunities for Johnson Controls and Azek

0.7

Correlation Coefficient

Johnson Controls  Azek

Poor diversification

The 3 months correlation between Johnson and Azek is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company 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 Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of Johnson Controls i.e., Johnson Controls and Azek go up and down completely randomly.

Pair Corralation between Johnson Controls and Azek

Considering the 90-day investment horizon Johnson Controls International is expected to generate 0.7 times more return on investment than Azek. However, Johnson Controls International is 1.42 times less risky than Azek. It trades about 0.08 of its potential returns per unit of risk. Azek Company is currently generating about 0.0 per unit of risk. If you would invest  6,297  in Johnson Controls International on September 20, 2024 and sell it today you would earn a total of  1,574  from holding Johnson Controls International or generate 25.0% return on investment over 90 days.

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

Johnson Controls International  vs.  Azek Company

Johnson Controls Int

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 5 (%) 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.

Azek Company

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azek Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Azek is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Johnson Controls and Azek

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

The idea behind Johnson Controls International and Azek Company 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.