Correlation Between Johnson Controls and AAON

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

Diversification Opportunities for Johnson Controls and AAON

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Johnson and AAON is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON 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 AAON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAON Inc has no effect on the direction of Johnson Controls i.e., Johnson Controls and AAON go up and down completely randomly.

Pair Corralation between Johnson Controls and AAON

Considering the 90-day investment horizon Johnson Controls International is expected to generate 0.85 times more return on investment than AAON. However, Johnson Controls International is 1.18 times less risky than AAON. It trades about 0.06 of its potential returns per unit of risk. AAON Inc is currently generating about 0.03 per unit of risk. If you would invest  4,369  in Johnson Controls International on September 2, 2022 and sell it today you would earn a total of  2,275  from holding Johnson Controls International or generate 52.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Johnson Controls International  vs.  AAON Inc

 Performance (%) 
       Timeline  
Johnson Controls Int 
Johnson Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Johnson Controls reported solid returns over the last few months and may actually be approaching a breakup point.

Johnson Price Channel

AAON Inc 
AAON Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AAON Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, AAON disclosed solid returns over the last few months and may actually be approaching a breakup point.

AAON Price Channel

Johnson Controls and AAON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Controls and AAON

The main advantage of trading using opposite Johnson Controls and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Controls position performs unexpectedly, AAON 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 AAON will offset losses from the drop in AAON's long position.
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The idea behind Johnson Controls International and AAON Inc 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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