Correlation Between Johnson Controls and Jacobs Solutions
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and Jacobs Solutions 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 Jacobs Solutions 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 Jacobs Solutions, you can compare the effects of market volatilities on Johnson Controls and Jacobs Solutions 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 Jacobs Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and Jacobs Solutions.
Diversification Opportunities for Johnson Controls and Jacobs Solutions
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Johnson and Jacobs is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions 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 Jacobs Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacobs Solutions has no effect on the direction of Johnson Controls i.e., Johnson Controls and Jacobs Solutions go up and down completely randomly.
Pair Corralation between Johnson Controls and Jacobs Solutions
Considering the 90-day investment horizon Johnson Controls International is expected to generate 0.97 times more return on investment than Jacobs Solutions. However, Johnson Controls International is 1.03 times less risky than Jacobs Solutions. It trades about 0.0 of its potential returns per unit of risk. Jacobs Solutions is currently generating about -0.23 per unit of risk. If you would invest 6,376 in Johnson Controls International on January 19, 2024 and sell it today you would lose (7.00) from holding Johnson Controls International or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Controls International vs. Jacobs Solutions
Performance |
| Timeline |
| Johnson Controls Int |
| Jacobs Solutions |
Johnson Controls and Jacobs Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and Jacobs Solutions
The main advantage of trading using opposite Johnson Controls and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, Jacobs Solutions 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 Jacobs Solutions will offset losses from the drop in Jacobs Solutions' long position.| Johnson Controls vs. Carrier GlobalCorp | 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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