Correlation Between Honeywell International and CITIC

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

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

Diversification Opportunities for Honeywell International and CITIC

0.28

Correlation Coefficient

Honeywell International  CITIC

Modest diversification

The 3 months correlation between Honeywell and CITIC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Honeywell International i.e., Honeywell International and CITIC go up and down completely randomly.

Pair Corralation between Honeywell International and CITIC

Assuming the 90 days trading horizon Honeywell International is expected to under-perform the CITIC. But the stock apears to be less risky and, when comparing its historical volatility, Honeywell International is 1.87 times less risky than CITIC. The stock trades about 0.0 of its potential returns per unit of risk. The CITIC Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  105.00  in CITIC Limited on September 23, 2024 and sell it today you would earn a total of  2.00  from holding CITIC Limited or generate 1.9% return on investment over 90 days.

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

Honeywell International  vs.  CITIC Limited

Honeywell International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 16 (%) 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.

CITIC Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honeywell International and CITIC

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

The idea behind Honeywell International and CITIC 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.