Correlation Between Johnson Controls and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and Trane Technologies 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 Trane Technologies 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 Trane Technologies plc, you can compare the effects of market volatilities on Johnson Controls and Trane Technologies 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 Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and Trane Technologies.
Diversification Opportunities for Johnson Controls and Trane Technologies
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Johnson and Trane is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Johnson Controls i.e., Johnson Controls and Trane Technologies go up and down completely randomly.
Pair Corralation between Johnson Controls and Trane Technologies
Considering the 90-day investment horizon Johnson Controls International is expected to generate 1.42 times more return on investment than Trane Technologies. However, Johnson Controls is 1.42 times more volatile than Trane Technologies plc. It trades about 0.16 of its potential returns per unit of risk. Trane Technologies plc is currently generating about 0.19 per unit of risk. If you would invest 7,773 in Johnson Controls International on August 27, 2024 and sell it today you would earn a total of 572.00 from holding Johnson Controls International or generate 7.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Controls International vs. Trane Technologies plc
Performance |
| Timeline |
| Johnson Controls Int |
| Trane Technologies plc |
Johnson Controls and Trane Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and Trane Technologies
The main advantage of trading using opposite Johnson Controls and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, Trane Technologies 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 Trane Technologies will offset losses from the drop in Trane Technologies' long position.| Johnson Controls vs. Carrier Global Corp | Johnson Controls vs. Lennox International | Johnson Controls vs. Masco | Johnson Controls vs. Carlisle Companies Incorporated |
| Trane Technologies vs. Trex Company | Trane Technologies vs. Gibraltar Industries | Trane Technologies vs. Travis Perkins PLC | Trane Technologies vs. Janus International Group |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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