Correlation Between Johnson Controls and Argan
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and Argan 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 Argan 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 Argan Inc, you can compare the effects of market volatilities on Johnson Controls and Argan 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 Argan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and Argan.
Diversification Opportunities for Johnson Controls and Argan
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Johnson and Argan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Argan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argan Inc 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 Argan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argan Inc has no effect on the direction of Johnson Controls i.e., Johnson Controls and Argan go up and down completely randomly.
Pair Corralation between Johnson Controls and Argan
Considering the 90-day investment horizon Johnson Controls is expected to generate 1.25 times less return on investment than Argan. But when comparing it to its historical volatility, Johnson Controls International is 1.71 times less risky than Argan. It trades about 0.16 of its potential returns per unit of risk. Argan Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,371 in Argan Inc on January 19, 2024 and sell it today you would earn a total of 1,728 from holding Argan Inc or generate 39.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Controls International vs. Argan Inc
Performance |
| Timeline |
| Johnson Controls Int |
| Argan Inc |
Johnson Controls and Argan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and Argan
The main advantage of trading using opposite Johnson Controls and Argan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, Argan 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 Argan will offset losses from the drop in Argan's long position.| Johnson Controls vs. Carrier GlobalCorp | Johnson Controls vs. Lennox International | Johnson Controls vs. Masco | Johnson Controls vs. Carlisle Companies Incorporated |
| Argan vs. Arcosa Inc | Argan vs. Construction Partners | Argan vs. Topbuild Corp | Argan vs. Comfort Systems USA |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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