Correlation Between Honeywell International and Jardine Matheson

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

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

Diversification Opportunities for Honeywell International and Jardine Matheson

0.77

Correlation Coefficient

Honeywell International  Jardine Matheson

Poor diversification

The 3 months correlation between Honeywell and Jardine is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Jardine Matheson Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jardine Matheson Holdings 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 Jardine Matheson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jardine Matheson Holdings has no effect on the direction of Honeywell International i.e., Honeywell International and Jardine Matheson go up and down completely randomly.

Pair Corralation between Honeywell International and Jardine Matheson

Assuming the 90 days trading horizon Honeywell International is expected to generate 1.22 times less return on investment than Jardine Matheson. But when comparing it to its historical volatility, Honeywell International is 1.53 times less risky than Jardine Matheson. It trades about 0.13 of its potential returns per unit of risk. Jardine Matheson Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,476  in Jardine Matheson Holdings on October 24, 2024 and sell it today you would earn a total of  430.00  from holding Jardine Matheson Holdings or generate 12.37% return on investment over 90 days.

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

Honeywell International  vs.  Jardine Matheson Holdings

Honeywell International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Honeywell International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jardine Matheson Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jardine Matheson Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Jardine Matheson reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honeywell International and Jardine Matheson

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

The idea behind Honeywell International and Jardine Matheson Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.