Correlation Between Quanex Building and Johnson Controls
Can any of the company-specific risk be diversified away by investing in both Quanex Building 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 Quanex Building and Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quanex Building Products and Johnson Controls International, you can compare the effects of market volatilities on Quanex Building 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 Quanex Building with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quanex Building and Johnson Controls.
Diversification Opportunities for Quanex Building and Johnson Controls
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Quanex and Johnson is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products 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 Quanex Building 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 Quanex Building Products 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 Quanex Building i.e., Quanex Building and Johnson Controls go up and down completely randomly.
Pair Corralation between Quanex Building and Johnson Controls
Allowing for the 90-day total investment horizon Quanex Building is expected to generate 1.67 times less return on investment than Johnson Controls. In addition to that, Quanex Building is 1.68 times more volatile than Johnson Controls International. It trades about 0.01 of its total potential returns per unit of risk. Johnson Controls International is currently generating about 0.04 per unit of volatility. If you would invest 6,519 in Johnson Controls International on October 20, 2024 and sell it today you would earn a total of 1,595 from holding Johnson Controls International or generate 24.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quanex Building Products vs. Johnson Controls International
Performance |
| Timeline |
| Quanex Building Products |
| Johnson Controls Int |
Quanex Building and Johnson Controls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quanex Building and Johnson Controls
The main advantage of trading using opposite Quanex Building and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanex Building 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.| Quanex Building vs. Gibraltar Industries | Quanex Building vs. Carpenter Technology | Quanex Building vs. Myers Industries | Quanex Building vs. Griffon |
| 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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