Correlation Between Johnson Controls and Odfjell Drilling
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and Odfjell Drilling 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 Odfjell Drilling 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 Odfjell Drilling, you can compare the effects of market volatilities on Johnson Controls and Odfjell Drilling 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 Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and Odfjell Drilling.
Diversification Opportunities for Johnson Controls and Odfjell Drilling
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Johnson and Odfjell is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling 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 Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of Johnson Controls i.e., Johnson Controls and Odfjell Drilling go up and down completely randomly.
Pair Corralation between Johnson Controls and Odfjell Drilling
Assuming the 90 days trading horizon Johnson Controls is expected to generate 7.68 times less return on investment than Odfjell Drilling. But when comparing it to its historical volatility, Johnson Controls International is 2.19 times less risky than Odfjell Drilling. It trades about 0.14 of its potential returns per unit of risk. Odfjell Drilling is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 5,010 in Odfjell Drilling on October 24, 2024 and sell it today you would earn a total of 1,050 from holding Odfjell Drilling or generate 20.96% 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. Odfjell Drilling
Performance |
| Timeline |
| Johnson Controls Int |
| Odfjell Drilling |
Johnson Controls and Odfjell Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and Odfjell Drilling
The main advantage of trading using opposite Johnson Controls and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, Odfjell Drilling 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 Odfjell Drilling will offset losses from the drop in Odfjell Drilling's long position.| Johnson Controls vs. Odfjell Drilling | Johnson Controls vs. Impax Environmental Markets | Johnson Controls vs. Blackrock World Mining | Johnson Controls vs. Silvercorp Metals |
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Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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