Correlation Between Johnson Controls and Roper Technologies

Can any of the company-specific risk be diversified away by investing in both Johnson Controls and Roper Technologies 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 Roper Technologies 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 Roper Technologies Common, you can compare the effects of market volatilities on Johnson Controls and Roper Technologies 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 Roper Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and Roper Technologies.

Diversification Opportunities for Johnson Controls and Roper Technologies

-0.18

Correlation Coefficient

Johnson Controls  Roper Technologies

Good diversification

The 3 months correlation between Johnson and Roper is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Roper Technologies Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies Common 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 Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies Common has no effect on the direction of Johnson Controls i.e., Johnson Controls and Roper Technologies go up and down completely randomly.

Pair Corralation between Johnson Controls and Roper Technologies

Considering the 90-day investment horizon Johnson Controls International is expected to generate 0.8 times more return on investment than Roper Technologies. However, Johnson Controls International is 1.25 times less risky than Roper Technologies. It trades about 0.0 of its potential returns per unit of risk. Roper Technologies Common is currently generating about -0.32 per unit of risk. If you would invest  6,513  in Johnson Controls International on January 31, 2024 and sell it today you would lose (2.00) from holding Johnson Controls International or give up 0.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Johnson Controls International  vs.  Roper Technologies Common

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.

Roper Technologies Common

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roper Technologies Common has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Roper Technologies is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Johnson Controls and Roper Technologies

The main advantage of trading using opposite Johnson Controls and Roper Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, Roper Technologies 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 Roper Technologies will offset losses from the drop in Roper Technologies' long position.

The idea behind Johnson Controls International and Roper Technologies Common 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 CEOs Directory module to screen CEOs from public companies around the world.