Correlation Between CSX and Honeywell International

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

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

Diversification Opportunities for CSX and Honeywell International

0.36

Correlation Coefficient

CSX  Honeywell International

Weak diversification

The 3 months correlation between CSX and Honeywell is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and CSX 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 CSX Corporation 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 CSX i.e., CSX and Honeywell International go up and down completely randomly.

Pair Corralation between CSX and Honeywell International

Considering the 90-day investment horizon CSX Corporation is expected to under-perform the Honeywell International. In addition to that, CSX is 1.03 times more volatile than Honeywell International. It trades about -0.08 of its total potential returns per unit of risk. Honeywell International is currently generating about -0.06 per unit of volatility. If you would invest  22,539  in Honeywell International on December 28, 2024 and sell it today you would lose (1,122) from holding Honeywell International or give up 4.98% of portfolio value over 90 days.

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

CSX Corp.  vs.  Honeywell International

CSX Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Honeywell International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honeywell International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Honeywell International is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CSX and Honeywell International

The main advantage of trading using opposite CSX and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX 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 CSX Corporation 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 Transaction History module to view history of all your transactions and understand their impact on performance.