Correlation Between Carlisle Companies and Johnson Controls

Can any of the company-specific risk be diversified away by investing in both Carlisle Companies 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 Carlisle Companies and Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carlisle Companies Incorporated and Johnson Controls International, you can compare the effects of market volatilities on Carlisle Companies 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 Carlisle Companies with a short position of Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlisle Companies and Johnson Controls.

Diversification Opportunities for Carlisle Companies and Johnson Controls

0.92

Correlation Coefficient

Carlisle Companies  Johnson Controls

Almost no diversification

The 3 months correlation between Carlisle and Johnson is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Carlisle Companies Incorporate 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 Carlisle Companies 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 Carlisle Companies Incorporated 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 Carlisle Companies i.e., Carlisle Companies and Johnson Controls go up and down completely randomly.

Pair Corralation between Carlisle Companies and Johnson Controls

Considering the 90-day investment horizon Carlisle Companies Incorporated is expected to generate 1.11 times more return on investment than Johnson Controls. However, Carlisle Companies is 1.11 times more volatile than Johnson Controls International. It trades about 0.06 of its potential returns per unit of risk. Johnson Controls International is currently generating about 0.04 per unit of risk. If you would invest  23,638  in Carlisle Companies Incorporated on January 31, 2024 and sell it today you would earn a total of  16,062  from holding Carlisle Companies Incorporated or generate 67.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Carlisle Companies Incorporate  vs.  Johnson Controls International

Carlisle Companies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlisle Companies Incorporated are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Carlisle Companies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Johnson Controls Int

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental indicators, Johnson Controls demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlisle Companies and Johnson Controls

The main advantage of trading using opposite Carlisle Companies and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlisle Companies 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.

The idea behind Carlisle Companies Incorporated and Johnson Controls International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.