Correlation Between Franklin Credit and HONEYWELL

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

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

Diversification Opportunities for Franklin Credit and HONEYWELL

-0.26

Correlation Coefficient

Franklin Credit  HONEYWELL

Very good diversification

The 3 months correlation between Franklin and HONEYWELL is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Credit Management and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL and Franklin Credit 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 Franklin Credit Management 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 Franklin Credit i.e., Franklin Credit and HONEYWELL go up and down completely randomly.

Pair Corralation between Franklin Credit and HONEYWELL

Given the investment horizon of 90 days Franklin Credit Management is expected to generate 5.42 times more return on investment than HONEYWELL. However, Franklin Credit is 5.42 times more volatile than HONEYWELL INTERNATIONAL INC. It trades about 0.05 of its potential returns per unit of risk. HONEYWELL INTERNATIONAL INC is currently generating about 0.07 per unit of risk. If you would invest  11.00  in Franklin Credit Management on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Franklin Credit Management or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.96%
Values	Daily Returns

Franklin Credit Management  vs.  HONEYWELL INTERNATIONAL INC

Franklin Credit Mana

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Credit Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Franklin Credit displayed solid returns over the last few months and may actually be approaching a breakup point.

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HONEYWELL INTERNATIONAL INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, HONEYWELL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Franklin Credit and HONEYWELL

The main advantage of trading using opposite Franklin Credit and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Credit 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 Franklin Credit Management 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.