Correlation Between Johnson Controls and Tokyu Construction

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

Diversification Opportunities for Johnson Controls and Tokyu Construction

0.34

Correlation Coefficient

Johnson Controls  Tokyu Construction

Weak diversification

The 3 months correlation between Johnson and Tokyu is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction 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 Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of Johnson Controls i.e., Johnson Controls and Tokyu Construction go up and down completely randomly.

Pair Corralation between Johnson Controls and Tokyu Construction

Assuming the 90 days trading horizon Johnson Controls International is expected to under-perform the Tokyu Construction. In addition to that, Johnson Controls is 1.55 times more volatile than Tokyu Construction Co. It trades about -0.1 of its total potential returns per unit of risk. Tokyu Construction Co is currently generating about 0.12 per unit of volatility. If you would invest  426.00  in Tokyu Construction Co on October 6, 2024 and sell it today you would earn a total of  8.00  from holding Tokyu Construction Co or generate 1.88% return on investment over 90 days.

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

Johnson Controls International  vs.  Tokyu Construction Co

Johnson Controls Int

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Johnson Controls reported solid returns over the last few months and may actually be approaching a breakup point.

Tokyu Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyu Construction Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tokyu Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Johnson Controls and Tokyu Construction

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

The idea behind Johnson Controls International and Tokyu Construction Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.