Correlation Between NIBE Industrier and Johnson Controls

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

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

Diversification Opportunities for NIBE Industrier and Johnson Controls

-0.32

Correlation Coefficient

NIBE Industrier  Johnson Controls

Very good diversification

The 3 months correlation between NIBE and Johnson is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB 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 NIBE Industrier 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 NIBE Industrier AB 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 NIBE Industrier i.e., NIBE Industrier and Johnson Controls go up and down completely randomly.

Pair Corralation between NIBE Industrier and Johnson Controls

Assuming the 90 days horizon NIBE Industrier AB is expected to under-perform the Johnson Controls. In addition to that, NIBE Industrier is 1.22 times more volatile than Johnson Controls International. It trades about -0.28 of its total potential returns per unit of risk. Johnson Controls International is currently generating about -0.15 per unit of volatility. If you would invest  8,271  in Johnson Controls International on October 6, 2024 and sell it today you would lose (376.00) from holding Johnson Controls International or give up 4.55% of portfolio value over 90 days.

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

NIBE Industrier AB  vs.  Johnson Controls International

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Johnson Controls Int

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 4 (%) 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.

Pair Trading with NIBE Industrier and Johnson Controls

The main advantage of trading using opposite NIBE Industrier and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIBE Industrier 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 NIBE Industrier AB 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .