Correlation Between Honeywell International and Masco

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

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

Diversification Opportunities for Honeywell International and Masco

0.88

Correlation Coefficient

Honeywell International  Masco

Very poor diversification

The 3 months correlation between Honeywell and Masco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco 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 Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Honeywell International i.e., Honeywell International and Masco go up and down completely randomly.

Pair Corralation between Honeywell International and Masco

Assuming the 90 days trading horizon Honeywell International is expected to generate 23.12 times more return on investment than Masco. However, Honeywell International is 23.12 times more volatile than Masco. It trades about 0.1 of its potential returns per unit of risk. Masco is currently generating about 0.13 per unit of risk. If you would invest  386,033  in Honeywell International on September 23, 2024 and sell it today you would earn a total of  72,316  from holding Honeywell International or generate 18.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

Honeywell International  vs.  Masco

Honeywell International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Honeywell International showed solid returns over the last few months and may actually be approaching a breakup point.

Masco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Masco is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Honeywell International and Masco

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

The idea behind Honeywell International and Masco 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.