Correlation Between Louisiana Pacific and Johnson Controls
Can any of the company-specific risk be diversified away by investing in both Louisiana Pacific 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 Louisiana Pacific and Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Louisiana Pacific and Johnson Controls International, you can compare the effects of market volatilities on Louisiana Pacific 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 Louisiana Pacific with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Louisiana Pacific and Johnson Controls.
Diversification Opportunities for Louisiana Pacific and Johnson Controls
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Louisiana and Johnson is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Louisiana Pacific 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 Louisiana Pacific 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 Louisiana Pacific 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 Louisiana Pacific i.e., Louisiana Pacific and Johnson Controls go up and down completely randomly.
Pair Corralation between Louisiana Pacific and Johnson Controls
Considering the 90-day investment horizon Louisiana Pacific is expected to generate 1.07 times more return on investment than Johnson Controls. However, Louisiana Pacific is 1.07 times more volatile than Johnson Controls International. It trades about 0.27 of its potential returns per unit of risk. Johnson Controls International is currently generating about 0.2 per unit of risk. If you would invest 9,984 in Louisiana Pacific on August 24, 2024 and sell it today you would earn a total of 1,456 from holding Louisiana Pacific or generate 14.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Louisiana Pacific vs. Johnson Controls International
Performance |
| Timeline |
| Louisiana Pacific |
| Johnson Controls Int |
Louisiana Pacific and Johnson Controls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Louisiana Pacific and Johnson Controls
The main advantage of trading using opposite Louisiana Pacific and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Louisiana Pacific 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.| Louisiana Pacific vs. Lennox International | Louisiana Pacific vs. Fortune Brands Innovations | Louisiana Pacific vs. Trane Technologies plc | Louisiana Pacific vs. Johnson Controls International |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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