Correlation Between Johnson Controls and Geberit AG
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and Geberit AG 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 Geberit AG 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 Geberit AG ADR, you can compare the effects of market volatilities on Johnson Controls and Geberit AG 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 Geberit AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and Geberit AG.
Diversification Opportunities for Johnson Controls and Geberit AG
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Johnson and Geberit is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Geberit AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geberit AG ADR 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 Geberit AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geberit AG ADR has no effect on the direction of Johnson Controls i.e., Johnson Controls and Geberit AG go up and down completely randomly.
Pair Corralation between Johnson Controls and Geberit AG
Considering the 90-day investment horizon Johnson Controls International is expected to generate 1.33 times more return on investment than Geberit AG. However, Johnson Controls is 1.33 times more volatile than Geberit AG ADR. It trades about 0.09 of its potential returns per unit of risk. Geberit AG ADR is currently generating about -0.01 per unit of risk. If you would invest 7,092 in Johnson Controls International on September 1, 2024 and sell it today you would earn a total of 1,294 from holding Johnson Controls International or generate 18.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Johnson Controls International vs. Geberit AG ADR
Performance |
| Timeline |
| Johnson Controls Int |
| Geberit AG ADR |
Johnson Controls and Geberit AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and Geberit AG
The main advantage of trading using opposite Johnson Controls and Geberit AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, Geberit AG 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 Geberit AG will offset losses from the drop in Geberit AG's long position.| Johnson Controls vs. Carrier Global Corp | Johnson Controls vs. Lennox International | Johnson Controls vs. Masco | Johnson Controls vs. Carlisle Companies Incorporated |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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