Correlation Between Honeywell International and NAGOYA RAILROAD

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

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

Diversification Opportunities for Honeywell International and NAGOYA RAILROAD

0.78

Correlation Coefficient

Honeywell International  NAGOYA RAILROAD

Poor diversification

The 3 months correlation between Honeywell and NAGOYA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and NAGOYA RAILROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAGOYA RAILROAD 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 NAGOYA RAILROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAGOYA RAILROAD has no effect on the direction of Honeywell International i.e., Honeywell International and NAGOYA RAILROAD go up and down completely randomly.

Pair Corralation between Honeywell International and NAGOYA RAILROAD

Assuming the 90 days trading horizon Honeywell International is expected to under-perform the NAGOYA RAILROAD. But the stock apears to be less risky and, when comparing its historical volatility, Honeywell International is 1.15 times less risky than NAGOYA RAILROAD. The stock trades about -0.05 of its potential returns per unit of risk. The NAGOYA RAILROAD is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,020  in NAGOYA RAILROAD on October 23, 2024 and sell it today you would lose (10.00) from holding NAGOYA RAILROAD or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

Honeywell International  vs.  NAGOYA RAILROAD

Honeywell International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Honeywell International is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

NAGOYA RAILROAD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NAGOYA RAILROAD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NAGOYA RAILROAD is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Honeywell International and NAGOYA RAILROAD

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

The idea behind Honeywell International and NAGOYA RAILROAD 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.