Correlation Between Boeing and HONEYWELL

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

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

Diversification Opportunities for Boeing and HONEYWELL

-0.66

Correlation Coefficient

Boeing  HONEYWELL

Excellent diversification

The 3 months correlation between Boeing and HONEYWELL is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL and Boeing 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 The Boeing 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 Boeing i.e., Boeing and HONEYWELL go up and down completely randomly.

Pair Corralation between Boeing and HONEYWELL

Allowing for the 90-day total investment horizon Boeing is expected to generate 1.01 times less return on investment than HONEYWELL. But when comparing it to its historical volatility, The Boeing is 1.65 times less risky than HONEYWELL. It trades about 0.16 of its potential returns per unit of risk. HONEYWELL INTERNATIONAL INC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,671  in HONEYWELL INTERNATIONAL INC on October 26, 2024 and sell it today you would earn a total of  791.00  from holding HONEYWELL INTERNATIONAL INC or generate 11.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	71.19%
Values	Daily Returns

The Boeing  vs.  HONEYWELL INTERNATIONAL INC

Boeing

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HONEYWELL INTERNATIONAL INC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, HONEYWELL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boeing and HONEYWELL

The main advantage of trading using opposite Boeing and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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 The Boeing 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.