Correlation Between CK Hutchison and Honeywell International

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

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

Diversification Opportunities for CK Hutchison and Honeywell International

-0.64

Correlation Coefficient

CK Hutchison  Honeywell International

Excellent diversification

The 3 months correlation between CKHUY and Honeywell is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding CK Hutchison Holdings and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and CK Hutchison 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 CK Hutchison Holdings 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 CK Hutchison i.e., CK Hutchison and Honeywell International go up and down completely randomly.

Pair Corralation between CK Hutchison and Honeywell International

Assuming the 90 days horizon CK Hutchison Holdings is expected to under-perform the Honeywell International. In addition to that, CK Hutchison is 1.14 times more volatile than Honeywell International. It trades about -0.02 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.17 per unit of volatility. If you would invest  20,386  in Honeywell International on September 3, 2024 and sell it today you would earn a total of  2,907  from holding Honeywell International or generate 14.26% return on investment over 90 days.

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

CK Hutchison Holdings  vs.  Honeywell International

CK Hutchison Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK Hutchison Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CK Hutchison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Honeywell International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Honeywell International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CK Hutchison and Honeywell International

The main advantage of trading using opposite CK Hutchison and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CK Hutchison 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 CK Hutchison Holdings 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.