Correlation Between Johnson Controls and EMCOR
Can any of the company-specific risk be diversified away by investing in both Johnson Controls and EMCOR 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 EMCOR 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 EMCOR Group, you can compare the effects of market volatilities on Johnson Controls and EMCOR 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 EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Controls and EMCOR.
Diversification Opportunities for Johnson Controls and EMCOR
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Johnson and EMCOR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group 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 EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Johnson Controls i.e., Johnson Controls and EMCOR go up and down completely randomly.
Pair Corralation between Johnson Controls and EMCOR
Considering the 90-day investment horizon Johnson Controls is expected to generate 23.86 times less return on investment than EMCOR. But when comparing it to its historical volatility, Johnson Controls International is 1.03 times less risky than EMCOR. It trades about 0.01 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 17,413 in EMCOR Group on February 6, 2024 and sell it today you would earn a total of 20,247 from holding EMCOR Group or generate 116.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Controls International vs. EMCOR Group
Performance |
| Timeline |
| Johnson Controls Int |
| EMCOR Group |
Johnson Controls and EMCOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Controls and EMCOR
The main advantage of trading using opposite Johnson Controls and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, EMCOR 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 EMCOR will offset losses from the drop in EMCOR's long position.| Johnson Controls vs. Carpenter Technology | Johnson Controls vs. Myers Industries | Johnson Controls vs. Griffon |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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