Correlation Between Janus International and Trane Technologies

Can any of the company-specific risk be diversified away by investing in both Janus International and Trane 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 Janus International and Trane Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Janus International Group and Trane Technologies plc, you can compare the effects of market volatilities on Janus International and Trane 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 Janus International with a short position of Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Janus International and Trane Technologies.

Diversification Opportunities for Janus International and Trane Technologies

-0.72

Correlation Coefficient

Janus International  Trane Technologies

Pay attention - limited upside

The 3 months correlation between Janus and Trane is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Janus International Group and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc and Janus International 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 Janus International Group are associated (or correlated) with Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Janus International i.e., Janus International and Trane Technologies go up and down completely randomly.

Pair Corralation between Janus International and Trane Technologies

Considering the 90-day investment horizon Janus International Group is expected to under-perform the Trane Technologies. In addition to that, Janus International is 1.53 times more volatile than Trane Technologies plc. It trades about -0.05 of its total potential returns per unit of risk. Trane Technologies plc is currently generating about 0.24 per unit of volatility. If you would invest  27,575  in Trane Technologies plc on February 21, 2024 and sell it today you would earn a total of  5,516  from holding Trane Technologies plc or generate 20.0% return on investment over 90 days.

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

Janus International Group  vs.  Trane Technologies plc

Janus International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Janus International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Janus International is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Trane Technologies plc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Trane Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Janus International and Trane Technologies

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

The idea behind Janus International Group and Trane Technologies plc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.