Correlation Between Johnson Controls and Owens Corning

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

Diversification Opportunities for Johnson Controls and Owens Corning

0.07

Correlation Coefficient

Johnson Controls  Owens Corning

Significant diversification

The 3 months correlation between Johnson and Owens is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of Johnson Controls i.e., Johnson Controls and Owens Corning go up and down completely randomly.

Pair Corralation between Johnson Controls and Owens Corning

Considering the 90-day investment horizon Johnson Controls International is expected to generate 1.12 times more return on investment than Owens Corning. However, Johnson Controls is 1.12 times more volatile than Owens Corning. It trades about 0.04 of its potential returns per unit of risk. Owens Corning is currently generating about -0.1 per unit of risk. If you would invest  7,946  in Johnson Controls International on December 27, 2024 and sell it today you would earn a total of  330.00  from holding Johnson Controls International or generate 4.15% return on investment over 90 days.

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

Johnson Controls International  vs.  Owens Corning

Johnson Controls Int

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 3 (%) 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.

Owens Corning

Risk-Adjusted Performance

Very Weak

Over the last 90 days Owens Corning has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Johnson Controls and Owens Corning

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

The idea behind Johnson Controls International and Owens Corning 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.