Correlation Between VA Tech and Johnson Controls
Can any of the company-specific risk be diversified away by investing in both VA Tech 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 VA Tech and Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VA Tech Wabag and Johnson Controls , you can compare the effects of market volatilities on VA Tech 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 VA Tech with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of VA Tech and Johnson Controls.
Diversification Opportunities for VA Tech and Johnson Controls
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between WABAG and Johnson is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and Johnson Controls in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Controls and VA Tech 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 VA Tech Wabag 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 VA Tech i.e., VA Tech and Johnson Controls go up and down completely randomly.
Pair Corralation between VA Tech and Johnson Controls
Assuming the 90 days trading horizon VA Tech Wabag is expected to generate 1.04 times more return on investment than Johnson Controls. However, VA Tech is 1.04 times more volatile than Johnson Controls . It trades about 0.03 of its potential returns per unit of risk. Johnson Controls is currently generating about -0.15 per unit of risk. If you would invest 177,795 in VA Tech Wabag on September 2, 2024 and sell it today you would earn a total of 1,695 from holding VA Tech Wabag or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VA Tech Wabag vs. Johnson Controls
Performance |
| Timeline |
| VA Tech Wabag |
| Johnson Controls |
VA Tech and Johnson Controls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VA Tech and Johnson Controls
The main advantage of trading using opposite VA Tech and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VA Tech 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.| VA Tech vs. Kingfa Science Technology | VA Tech vs. Rico Auto Industries | VA Tech vs. GACM Technologies Limited | VA Tech vs. COSMO FIRST LIMITED |
| Johnson Controls vs. Taj GVK Hotels | Johnson Controls vs. Jaypee Infratech Limited | Johnson Controls vs. VA Tech Wabag | Johnson Controls vs. Nazara Technologies Limited |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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