Correlation Between Johnson Controls and China Railway
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and China Railway 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 China Railway 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 China Railway Group, you can compare the effects of market volatilities on Johnson Controls and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and China Railway.
Diversification Opportunities for Johnson Controls and China Railway
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Johnson and China is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of Johnson Controls i.e., Johnson Controls and China Railway go up and down completely randomly.
Pair Corralation between Johnson Controls and China Railway
Assuming the 90 days trading horizon Johnson Controls is expected to generate 4.01 times less return on investment than China Railway. But when comparing it to its historical volatility, Johnson Controls International is 4.67 times less risky than China Railway. It trades about 0.09 of its potential returns per unit of risk. China Railway Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 26.00 in China Railway Group on September 1, 2024 and sell it today you would earn a total of 18.00 from holding China Railway Group or generate 69.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Controls International vs. China Railway Group
Performance |
| Timeline |
| Johnson Controls Int |
| China Railway Group |
Johnson Controls and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and China Railway
The main advantage of trading using opposite Johnson Controls and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.| Johnson Controls vs. Larsen Toubro Limited | Johnson Controls vs. Superior Plus Corp | Johnson Controls vs. NMI Holdings | Johnson Controls vs. Origin Agritech |
| China Railway vs. NIPPON STEEL SPADR | China Railway vs. LEGACY IRON ORE | China Railway vs. Boiron SA | China Railway vs. ONWARD MEDICAL BV |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Stocks Directory Find actively traded stocks across global markets |