Correlation Between Lennox International and Johnson Controls
Can any of the company-specific risk be diversified away by investing in both Lennox International and Johnson Controls 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 Lennox International and Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennox International and Johnson Controls International, you can compare the effects of market volatilities on Lennox International and Johnson Controls 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 Lennox International with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennox International and Johnson Controls.
Diversification Opportunities for Lennox International and Johnson Controls
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lennox and Johnson is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International and Johnson Controls International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Controls Int and Lennox International 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 Lennox International are associated (or correlated) with Johnson Controls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Controls Int has no effect on the direction of Lennox International i.e., Lennox International and Johnson Controls go up and down completely randomly.
Pair Corralation between Lennox International and Johnson Controls
Considering the 90-day investment horizon Lennox International is expected to generate 1.44 times less return on investment than Johnson Controls. But when comparing it to its historical volatility, Lennox International is 1.25 times less risky than Johnson Controls. It trades about 0.17 of its potential returns per unit of risk. Johnson Controls International is currently generating about 0.2 of returns per unit of risk over similar time horizon. 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennox International vs. Johnson Controls International
Performance |
| Timeline |
| Lennox International |
| Johnson Controls Int |
Lennox International and Johnson Controls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennox International and Johnson Controls
The main advantage of trading using opposite Lennox International and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennox International position performs unexpectedly, Johnson Controls 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 Johnson Controls will offset losses from the drop in Johnson Controls' long position.| Lennox International vs. Carrier Global Corp | Lennox International vs. Johnson Controls International | Lennox International vs. Masco | Lennox International vs. Carlisle Companies Incorporated |
| Johnson Controls vs. Carrier Global Corp | Johnson Controls vs. Lennox International | Johnson Controls vs. Masco | Johnson Controls 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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