Correlation Between Masco and Johnson Controls
Can any of the company-specific risk be diversified away by investing in both Masco 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 Masco and Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Masco and Johnson Controls International, you can compare the effects of market volatilities on Masco 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 Masco with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masco and Johnson Controls.
Diversification Opportunities for Masco and Johnson Controls
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Masco and Johnson is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Masco 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 Masco 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 Masco 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 Masco i.e., Masco and Johnson Controls go up and down completely randomly.
Pair Corralation between Masco and Johnson Controls
Considering the 90-day investment horizon Masco is expected to under-perform the Johnson Controls. But the stock apears to be less risky and, when comparing its historical volatility, Masco is 1.93 times less risky than Johnson Controls. The stock trades about -0.16 of its potential returns per unit of risk. The 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Masco vs. Johnson Controls International
Performance |
| Timeline |
| Masco |
| Johnson Controls Int |
Masco and Johnson Controls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Masco and Johnson Controls
The main advantage of trading using opposite Masco and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masco 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.| Masco vs. Trane Technologies plc | Masco vs. Quanex Building Products | Masco vs. Jeld Wen Holding | Masco vs. Azek Company |
| 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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