Correlation Between Honeywell International and Walmart
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Walmart, you can compare the effects of market volatilities on Honeywell International and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Walmart.
Diversification Opportunities for Honeywell International and Walmart
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Honeywell and Walmart is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Honeywell International i.e., Honeywell International and Walmart go up and down completely randomly.
Pair Corralation between Honeywell International and Walmart
Assuming the 90 days trading horizon Honeywell International is expected to generate 2.24 times less return on investment than Walmart. In addition to that, Honeywell International is 1.21 times more volatile than Walmart. It trades about 0.08 of its total potential returns per unit of risk. Walmart is currently generating about 0.21 per unit of volatility. If you would invest 165,633 in Walmart on September 23, 2024 and sell it today you would earn a total of 19,367 from holding Walmart or generate 11.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Honeywell International vs. Walmart
Performance |
Timeline |
Honeywell International |
Walmart |
Honeywell International and Walmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Honeywell International and Walmart
The main advantage of trading using opposite Honeywell International and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.Honeywell International vs. Micron Technology | Honeywell International vs. United States Steel | Honeywell International vs. Cognizant Technology Solutions | Honeywell International vs. DXC Technology |
Check out your portfolio center.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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