Correlation Between Johnson Controls and Intelligent Living

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

Diversification Opportunities for Johnson Controls and Intelligent Living

-0.03

Correlation Coefficient

Johnson Controls  Intelligent Living

Good diversification

The 3 months correlation between Johnson and Intelligent is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Intelligent Living Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intelligent Living 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 Intelligent Living. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intelligent Living has no effect on the direction of Johnson Controls i.e., Johnson Controls and Intelligent Living go up and down completely randomly.

Pair Corralation between Johnson Controls and Intelligent Living

Considering the 90-day investment horizon Johnson Controls International is expected to generate 0.41 times more return on investment than Intelligent Living. However, Johnson Controls International is 2.43 times less risky than Intelligent Living. It trades about 0.02 of its potential returns per unit of risk. Intelligent Living Application is currently generating about -0.23 per unit of risk. If you would invest  7,879  in Johnson Controls International on December 30, 2024 and sell it today you would earn a total of  90.00  from holding Johnson Controls International or generate 1.14% return on investment over 90 days.

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

Johnson Controls International  vs.  Intelligent Living Application

Johnson Controls Int

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Johnson Controls is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Intelligent Living

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intelligent Living Application has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Johnson Controls and Intelligent Living

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

The idea behind Johnson Controls International and Intelligent Living Application 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.