Correlation Between CITIC and Honeywell International

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

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

Diversification Opportunities for CITIC and Honeywell International

-0.66

Correlation Coefficient

CITIC  Honeywell International

Excellent diversification

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

Pair Corralation between CITIC and Honeywell International

Assuming the 90 days horizon CITIC Limited is expected to generate 3.14 times more return on investment than Honeywell International. However, CITIC is 3.14 times more volatile than Honeywell International. It trades about 0.04 of its potential returns per unit of risk. Honeywell International is currently generating about 0.05 per unit of risk. If you would invest  93.00  in CITIC Limited on October 25, 2024 and sell it today you would earn a total of  18.00  from holding CITIC Limited or generate 19.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.67%
Values	Daily Returns

CITIC Limited  vs.  Honeywell International

CITIC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. In spite of very 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 CITIC and Honeywell International

The main advantage of trading using opposite CITIC and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC 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 CITIC Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.