Correlation Between Honeywell International and TotalEnergies

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

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

Diversification Opportunities for Honeywell International and TotalEnergies

-0.45

Correlation Coefficient

Honeywell International  TotalEnergies

Very good diversification

The 3 months correlation between Honeywell and TotalEnergies is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE has no effect on the direction of Honeywell International i.e., Honeywell International and TotalEnergies go up and down completely randomly.

Pair Corralation between Honeywell International and TotalEnergies

Assuming the 90 days trading horizon Honeywell International is expected to generate 0.94 times more return on investment than TotalEnergies. However, Honeywell International is 1.06 times less risky than TotalEnergies. It trades about 0.08 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.15 per unit of risk. If you would invest  437,882  in Honeywell International on September 23, 2024 and sell it today you would earn a total of  20,467  from holding Honeywell International or generate 4.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Honeywell International  vs.  TotalEnergies SE

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.

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Honeywell International and TotalEnergies

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

The idea behind Honeywell International and TotalEnergies SE 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.