Correlation Between Apartment Investment and Honeywell International

Can any of the company-specific risk be diversified away by investing in both Apartment Investment and Honeywell International 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 Apartment Investment and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apartment Investment and and Honeywell International, you can compare the effects of market volatilities on Apartment Investment and Honeywell International 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 Apartment Investment with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apartment Investment and Honeywell International.

Diversification Opportunities for Apartment Investment and Honeywell International

0.45

Correlation Coefficient

Apartment Investment  Honeywell International

Very weak diversification

The 3 months correlation between Apartment and Honeywell is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Investment and and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Apartment Investment 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 Apartment Investment and are associated (or correlated) with Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Apartment Investment i.e., Apartment Investment and Honeywell International go up and down completely randomly.

Pair Corralation between Apartment Investment and Honeywell International

Assuming the 90 days trading horizon Apartment Investment and is expected to generate 4.56 times more return on investment than Honeywell International. However, Apartment Investment is 4.56 times more volatile than Honeywell International. It trades about 0.09 of its potential returns per unit of risk. Honeywell International is currently generating about -0.12 per unit of risk. If you would invest  5,045  in Apartment Investment and on October 23, 2024 and sell it today you would earn a total of  335.00  from holding Apartment Investment and or generate 6.64% return on investment over 90 days.

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

Apartment Investment and  vs.  Honeywell International

Apartment Investment and

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Apartment Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Honeywell International

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Honeywell International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Apartment Investment and Honeywell International

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

The idea behind Apartment Investment and and Honeywell International 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.