Correlation Between Johnson Controls and Jeld Wen

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

Diversification Opportunities for Johnson Controls and Jeld Wen

-0.61

Correlation Coefficient

Johnson Controls  Jeld Wen

Excellent diversification

The 3 months correlation between Johnson and Jeld is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Jeld Wen Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeld Wen Holding 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 Jeld Wen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeld Wen Holding has no effect on the direction of Johnson Controls i.e., Johnson Controls and Jeld Wen go up and down completely randomly.

Pair Corralation between Johnson Controls and Jeld Wen

Considering the 90-day investment horizon Johnson Controls International is expected to generate 0.33 times more return on investment than Jeld Wen. However, Johnson Controls International is 3.06 times less risky than Jeld Wen. It trades about 0.19 of its potential returns per unit of risk. Jeld Wen Holding is currently generating about -0.05 per unit of risk. If you would invest  7,041  in Johnson Controls International on August 31, 2024 and sell it today you would earn a total of  1,330  from holding Johnson Controls International or generate 18.89% return on investment over 90 days.

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

Johnson Controls International  vs.  Jeld Wen Holding

Johnson Controls Int

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Johnson Controls demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Jeld Wen Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeld Wen Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Johnson Controls and Jeld Wen

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

The idea behind Johnson Controls International and Jeld Wen Holding 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.