Correlation Between Johnson Controls and Larsen Toubro

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

Diversification Opportunities for Johnson Controls and Larsen Toubro

0.39

Correlation Coefficient

Johnson Controls  Larsen Toubro

Weak diversification

The 3 months correlation between Johnson and Larsen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Controls International and Larsen Toubro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larsen Toubro Limited 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 Larsen Toubro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larsen Toubro Limited has no effect on the direction of Johnson Controls i.e., Johnson Controls and Larsen Toubro go up and down completely randomly.

Pair Corralation between Johnson Controls and Larsen Toubro

Assuming the 90 days trading horizon Johnson Controls International is expected to generate 0.64 times more return on investment than Larsen Toubro. However, Johnson Controls International is 1.56 times less risky than Larsen Toubro. It trades about 0.25 of its potential returns per unit of risk. Larsen Toubro Limited is currently generating about 0.04 per unit of risk. If you would invest  6,888  in Johnson Controls International on April 24, 2025 and sell it today you would earn a total of  2,312  from holding Johnson Controls International or generate 33.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Johnson Controls International  vs.  Larsen Toubro Limited

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 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Johnson Controls reported solid returns over the last few months and may actually be approaching a breakup point.

Larsen Toubro Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Larsen Toubro Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Larsen Toubro may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Johnson Controls and Larsen Toubro

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

The idea behind Johnson Controls International and Larsen Toubro Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.