Correlation Between Johnson Controls and Lennox International
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and Lennox International 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 Lennox International 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 Lennox International, you can compare the effects of market volatilities on Johnson Controls and Lennox International 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 Lennox International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and Lennox International.
Diversification Opportunities for Johnson Controls and Lennox International
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Johnson and Lennox is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Lennox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennox International 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 Lennox International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennox International has no effect on the direction of Johnson Controls i.e., Johnson Controls and Lennox International go up and down completely randomly.
Pair Corralation between Johnson Controls and Lennox International
Considering the 90-day investment horizon Johnson Controls is expected to generate 2.9 times less return on investment than Lennox International. But when comparing it to its historical volatility, Johnson Controls International is 1.07 times less risky than Lennox International. It trades about 0.05 of its potential returns per unit of risk. Lennox International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 26,323 in Lennox International on August 27, 2024 and sell it today you would earn a total of 39,446 from holding Lennox International or generate 149.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Controls International vs. Lennox International
Performance |
| Timeline |
| Johnson Controls Int |
| Lennox International |
Johnson Controls and Lennox International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and Lennox International
The main advantage of trading using opposite Johnson Controls and Lennox International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, Lennox International 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 Lennox International will offset losses from the drop in Lennox International's long position.| Johnson Controls vs. Carrier Global Corp | Johnson Controls vs. Lennox International | Johnson Controls vs. Masco | Johnson Controls vs. Carlisle Companies Incorporated |
| Lennox International vs. Carrier Global Corp | Lennox International vs. Johnson Controls International | Lennox International vs. Masco | Lennox International vs. Carlisle Companies Incorporated |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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