Correlation Between Johnson Controls and Automatic Data

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

Diversification Opportunities for Johnson Controls and Automatic Data

-0.44

Correlation Coefficient

Johnson Controls  Automatic Data

Very good diversification

The 3 months correlation between Johnson and Automatic is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Johnson Controls i.e., Johnson Controls and Automatic Data go up and down completely randomly.

Pair Corralation between Johnson Controls and Automatic Data

Considering the 90-day investment horizon Johnson Controls International is expected to generate 1.6 times more return on investment than Automatic Data. However, Johnson Controls is 1.6 times more volatile than Automatic Data Processing. It trades about 0.08 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.05 per unit of risk. If you would invest  6,341  in Johnson Controls International on July 25, 2025 and sell it today you would earn a total of  4,513  from holding Johnson Controls International or generate 71.17% return on investment over 90 days.

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

Johnson Controls International  vs.  Automatic Data Processing

Johnson Controls Int

Risk-Adjusted Performance

Weakest

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

Automatic Data Processing

Risk-Adjusted Performance

Weakest

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Johnson Controls and Automatic Data

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

The idea behind Johnson Controls International and Automatic Data Processing 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..