Correlation Between Disney and HONEYWELL

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

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

Diversification Opportunities for Disney and HONEYWELL

-0.43

Correlation Coefficient

Disney  HONEYWELL

Very good diversification

The 3 months correlation between Disney and HONEYWELL is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and HONEYWELL INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTL INC and Disney 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 Walt Disney 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 INTL INC has no effect on the direction of Disney i.e., Disney and HONEYWELL go up and down completely randomly.

Pair Corralation between Disney and HONEYWELL

Considering the 90-day investment horizon Walt Disney is expected to generate 1.42 times more return on investment than HONEYWELL. However, Disney is 1.42 times more volatile than HONEYWELL INTL INC. It trades about 0.05 of its potential returns per unit of risk. HONEYWELL INTL INC is currently generating about -0.02 per unit of risk. If you would invest  9,137  in Walt Disney on October 5, 2024 and sell it today you would earn a total of  1,945  from holding Walt Disney or generate 21.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	48.88%
Values	Daily Returns

Walt Disney  vs.  HONEYWELL INTL INC

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

HONEYWELL INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HONEYWELL INTL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for HONEYWELL INTL INC investors.

Pair Trading with Disney and HONEYWELL

The main advantage of trading using opposite Disney and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney and HONEYWELL INTL 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.