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

0.89

Correlation Coefficient

Johnson Controls  EMCOR

Very poor diversification

The 3 months correlation between Johnson and EMCOR is 0.89. 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

Assuming the 90 days trading horizon Johnson Controls is expected to generate 1.19 times less return on investment than EMCOR. In addition to that, Johnson Controls is 1.09 times more volatile than EMCOR Group. It trades about 0.28 of its total potential returns per unit of risk. EMCOR Group is currently generating about 0.36 per unit of volatility. If you would invest  33,105  in EMCOR Group on April 23, 2025 and sell it today you would earn a total of  15,825  from holding EMCOR Group or generate 47.8% return on investment over 90 days.

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

Johnson Controls International  vs.  EMCOR Group

Johnson Controls Int

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Controls International are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward indicators, Johnson Controls reported solid returns over the last few months and may actually be approaching a breakup point.

EMCOR Group

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EMCOR reported solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind Johnson Controls International and EMCOR Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.