Correlation Between BOSTON BEER and Honeywell International

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

By analyzing existing cross correlation between BOSTON BEER A and Honeywell International, you can compare the effects of market volatilities on BOSTON BEER and Honeywell International 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 BOSTON BEER with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Honeywell International.

Diversification Opportunities for BOSTON BEER and Honeywell International

0.32

Correlation Coefficient

BOSTON BEER  Honeywell International

Weak diversification

The 3 months correlation between BOSTON and Honeywell is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and BOSTON BEER 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 BOSTON BEER A are associated (or correlated) with Honeywell International. 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 BOSTON BEER i.e., BOSTON BEER and Honeywell International go up and down completely randomly.

Pair Corralation between BOSTON BEER and Honeywell International

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Honeywell International. In addition to that, BOSTON BEER is 1.01 times more volatile than Honeywell International. It trades about -0.12 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.11 per unit of volatility. If you would invest  19,333  in Honeywell International on October 25, 2024 and sell it today you would earn a total of  2,112  from holding Honeywell International or generate 10.92% return on investment over 90 days.

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

BOSTON BEER A   vs.  Honeywell International

BOSTON BEER A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOSTON BEER A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Honeywell International

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with BOSTON BEER and Honeywell International

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

The idea behind BOSTON BEER A and Honeywell International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.