Correlation Between American Express and HONEYWELL

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

By analyzing existing cross correlation between American Express and HONEYWELL INTERNATIONAL INC, you can compare the effects of market volatilities on American Express and HONEYWELL 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 American Express with a short position of HONEYWELL. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and HONEYWELL.

Diversification Opportunities for American Express and HONEYWELL

-0.34

Correlation Coefficient

American Express  HONEYWELL

Very good diversification

The 3 months correlation between American and HONEYWELL is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Express and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL and American Express 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 American Express are associated (or correlated) with HONEYWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL INTERNATIONAL has no effect on the direction of American Express i.e., American Express and HONEYWELL go up and down completely randomly.

Pair Corralation between American Express and HONEYWELL

Considering the 90-day investment horizon American Express is expected to generate 3.47 times more return on investment than HONEYWELL. However, American Express is 3.47 times more volatile than HONEYWELL INTERNATIONAL INC. It trades about 0.16 of its potential returns per unit of risk. HONEYWELL INTERNATIONAL INC is currently generating about -0.01 per unit of risk. If you would invest  15,680  in American Express on October 11, 2024 and sell it today you would earn a total of  14,605  from holding American Express or generate 93.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.3%
Values	Daily Returns

American Express  vs.  HONEYWELL INTERNATIONAL INC

American Express

Risk-Adjusted Performance

8 of 100

OK

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

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HONEYWELL INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HONEYWELL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and HONEYWELL

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

The idea behind American Express and HONEYWELL INTERNATIONAL INC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..