Correlation Between Guangdong Investment and HONEYWELL

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

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

Diversification Opportunities for Guangdong Investment and HONEYWELL

-0.43

Correlation Coefficient

Guangdong Investment  HONEYWELL

Very good diversification

The 3 months correlation between Guangdong and HONEYWELL is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL and Guangdong Investment 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 Guangdong Investment Limited 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 Guangdong Investment i.e., Guangdong Investment and HONEYWELL go up and down completely randomly.

Pair Corralation between Guangdong Investment and HONEYWELL

Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 5.3 times more return on investment than HONEYWELL. However, Guangdong Investment is 5.3 times more volatile than HONEYWELL INTERNATIONAL INC. It trades about 0.06 of its potential returns per unit of risk. HONEYWELL INTERNATIONAL INC is currently generating about -0.17 per unit of risk. If you would invest  71.00  in Guangdong Investment Limited on October 8, 2024 and sell it today you would earn a total of  9.00  from holding Guangdong Investment Limited or generate 12.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Guangdong Investment Limited  vs.  HONEYWELL INTERNATIONAL INC

Guangdong Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HONEYWELL INTERNATIONAL INC investors.

Pair Trading with Guangdong Investment and HONEYWELL

The main advantage of trading using opposite Guangdong Investment and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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 Guangdong Investment Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.