Correlation Between Alerian Energy and HONEYWELL

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

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

Diversification Opportunities for Alerian Energy and HONEYWELL

-0.36

Correlation Coefficient

Alerian Energy  HONEYWELL

Very good diversification

The 3 months correlation between Alerian and HONEYWELL is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alerian Energy Infrastructure and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL and Alerian Energy 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 Alerian Energy Infrastructure 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 INTERNATIONAL has no effect on the direction of Alerian Energy i.e., Alerian Energy and HONEYWELL go up and down completely randomly.

Pair Corralation between Alerian Energy and HONEYWELL

Given the investment horizon of 90 days Alerian Energy is expected to generate 17.53 times less return on investment than HONEYWELL. But when comparing it to its historical volatility, Alerian Energy Infrastructure is 48.9 times less risky than HONEYWELL. It trades about 0.11 of its potential returns per unit of risk. HONEYWELL INTERNATIONAL INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,941  in HONEYWELL INTERNATIONAL INC on September 23, 2024 and sell it today you would earn a total of  2.00  from holding HONEYWELL INTERNATIONAL INC or generate 0.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.99%
Values	Daily Returns

Alerian Energy Infrastructure  vs.  HONEYWELL INTERNATIONAL INC

Alerian Energy Infra

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alerian Energy Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Alerian Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HONEYWELL INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HONEYWELL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alerian Energy and HONEYWELL

The main advantage of trading using opposite Alerian Energy and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alerian Energy 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 Alerian Energy Infrastructure and HONEYWELL INTERNATIONAL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.