Correlation Between Honeywell International and Retail Estates

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

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

Diversification Opportunities for Honeywell International and Retail Estates

-0.53

Correlation Coefficient

Honeywell International  Retail Estates

Excellent diversification

The 3 months correlation between Honeywell and Retail is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV and Honeywell International 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 Honeywell International are associated (or correlated) with Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of Honeywell International i.e., Honeywell International and Retail Estates go up and down completely randomly.

Pair Corralation between Honeywell International and Retail Estates

Assuming the 90 days horizon Honeywell International is expected to under-perform the Retail Estates. In addition to that, Honeywell International is 1.64 times more volatile than Retail Estates NV. It trades about -0.06 of its total potential returns per unit of risk. Retail Estates NV is currently generating about -0.1 per unit of volatility. If you would invest  5,780  in Retail Estates NV on October 24, 2024 and sell it today you would lose (120.00) from holding Retail Estates NV or give up 2.08% of portfolio value over 90 days.

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

Honeywell International  vs.  Retail Estates NV

Honeywell International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Honeywell International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Honeywell International and Retail Estates

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

The idea behind Honeywell International and Retail Estates NV 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.