Correlation Between Honeywell International and Poste Italiane

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

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

Diversification Opportunities for Honeywell International and Poste Italiane

0.86

Correlation Coefficient

Honeywell International  Poste Italiane

Very poor diversification

The 3 months correlation between Honeywell and Poste is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Poste Italiane SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poste Italiane SpA 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 Poste Italiane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poste Italiane SpA has no effect on the direction of Honeywell International i.e., Honeywell International and Poste Italiane go up and down completely randomly.

Pair Corralation between Honeywell International and Poste Italiane

Assuming the 90 days trading horizon Honeywell International is expected to generate 2.81 times less return on investment than Poste Italiane. In addition to that, Honeywell International is 1.28 times more volatile than Poste Italiane SpA. It trades about 0.02 of its total potential returns per unit of risk. Poste Italiane SpA is currently generating about 0.07 per unit of volatility. If you would invest  1,338  in Poste Italiane SpA on October 1, 2024 and sell it today you would earn a total of  15.00  from holding Poste Italiane SpA or generate 1.12% return on investment over 90 days.

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

Honeywell International  vs.  Poste Italiane SpA

Honeywell International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Honeywell International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Poste Italiane SpA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Poste Italiane SpA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Poste Italiane may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Honeywell International and Poste Italiane

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

The idea behind Honeywell International and Poste Italiane SpA 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.