Correlation Between Honeywell International and Disney

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

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

Diversification Opportunities for Honeywell International and Disney

0.54

Correlation Coefficient

Honeywell International  Disney

Very weak diversification

The 3 months correlation between Honeywell and Disney is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Honeywell International 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 Honeywell International are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Honeywell International i.e., Honeywell International and Disney go up and down completely randomly.

Pair Corralation between Honeywell International and Disney

Assuming the 90 days trading horizon Honeywell International is expected to generate 1.13 times more return on investment than Disney. However, Honeywell International is 1.13 times more volatile than The Walt Disney. It trades about -0.07 of its potential returns per unit of risk. The Walt Disney is currently generating about -0.13 per unit of risk. If you would invest  467,659  in Honeywell International on December 28, 2024 and sell it today you would lose (38,311) from holding Honeywell International or give up 8.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Honeywell International  vs.  The Walt Disney

Honeywell International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honeywell International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Honeywell International and Disney

The main advantage of trading using opposite Honeywell International and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.

The idea behind Honeywell International and The Walt Disney 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.