Correlation Between Johnson Controls and Quanex Building
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and Quanex Building 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 Quanex Building 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 Quanex Building Products, you can compare the effects of market volatilities on Johnson Controls and Quanex Building 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 Quanex Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and Quanex Building.
Diversification Opportunities for Johnson Controls and Quanex Building
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Johnson and Quanex is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Johnson Controls i.e., Johnson Controls and Quanex Building go up and down completely randomly.
Pair Corralation between Johnson Controls and Quanex Building
Considering the 90-day investment horizon Johnson Controls International is expected to generate 1.33 times more return on investment than Quanex Building. However, Johnson Controls is 1.33 times more volatile than Quanex Building Products. It trades about 0.2 of its potential returns per unit of risk. Quanex Building Products is currently generating about 0.05 per unit of risk. If you would invest 7,648 in Johnson Controls International on August 24, 2024 and sell it today you would earn a total of 749.00 from holding Johnson Controls International or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Controls International vs. Quanex Building Products
Performance |
| Timeline |
| Johnson Controls Int |
| Quanex Building Products |
Johnson Controls and Quanex Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and Quanex Building
The main advantage of trading using opposite Johnson Controls and Quanex Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, Quanex Building 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 Quanex Building will offset losses from the drop in Quanex Building's long position.| Johnson Controls vs. Carrier Global Corp | Johnson Controls vs. Lennox International | Johnson Controls vs. Masco | Johnson Controls vs. Carlisle Companies Incorporated |
| Quanex Building vs. Gibraltar Industries | Quanex Building vs. Carpenter Technology | Quanex Building vs. Griffon | Quanex Building vs. ABIVAX Socit Anonyme |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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