Correlation Between Visa and Johnson Controls
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Johnson Controls , you can compare the effects of market volatilities on Visa 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 Visa with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Johnson Controls.
Diversification Opportunities for Visa and Johnson Controls
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Johnson is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Johnson Controls in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Controls and Visa 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 Visa Class A 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 has no effect on the direction of Visa i.e., Visa and Johnson Controls go up and down completely randomly.
Pair Corralation between Visa and Johnson Controls
Taking into account the 90-day investment horizon Visa is expected to generate 2.16 times less return on investment than Johnson Controls. But when comparing it to its historical volatility, Visa Class A is 3.24 times less risky than Johnson Controls. It trades about 0.1 of its potential returns per unit of risk. Johnson Controls is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 104,880 in Johnson Controls on September 2, 2024 and sell it today you would earn a total of 82,240 from holding Johnson Controls or generate 78.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.58% |
| Values | Daily Returns |
Visa Class A vs. Johnson Controls
Performance |
| Timeline |
| Visa Class A |
| Johnson Controls |
Visa and Johnson Controls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Johnson Controls
The main advantage of trading using opposite Visa and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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