Correlation Between Fidelity National and Honeywell International

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

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

Diversification Opportunities for Fidelity National and Honeywell International

0.22

Correlation Coefficient

Fidelity National  Honeywell International

Modest diversification

The 3 months correlation between Fidelity and Honeywell is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Information and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Fidelity National 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 Fidelity National Information 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 Fidelity National i.e., Fidelity National and Honeywell International go up and down completely randomly.

Pair Corralation between Fidelity National and Honeywell International

Assuming the 90 days trading horizon Fidelity National Information is expected to generate 0.96 times more return on investment than Honeywell International. However, Fidelity National Information is 1.04 times less risky than Honeywell International. It trades about 0.05 of its potential returns per unit of risk. Honeywell International is currently generating about 0.04 per unit of risk. If you would invest  2,151  in Fidelity National Information on October 4, 2024 and sell it today you would earn a total of  1,041  from holding Fidelity National Information or generate 48.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.83%
Values	Daily Returns

Fidelity National Information  vs.  Honeywell International

Fidelity National

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fidelity National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Honeywell International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Honeywell International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity National and Honeywell International

The main advantage of trading using opposite Fidelity National and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity National 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 Fidelity National Information 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.