Correlation Between Honeywell International and Alliance Global

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

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

Diversification Opportunities for Honeywell International and Alliance Global

-0.36

Correlation Coefficient

Honeywell International  Alliance Global

Very good diversification

The 3 months correlation between Honeywell and Alliance is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Alliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Global Group 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 Alliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Global Group has no effect on the direction of Honeywell International i.e., Honeywell International and Alliance Global go up and down completely randomly.

Pair Corralation between Honeywell International and Alliance Global

Considering the 90-day investment horizon Honeywell International is expected to generate 0.94 times more return on investment than Alliance Global. However, Honeywell International is 1.06 times less risky than Alliance Global. It trades about 0.1 of its potential returns per unit of risk. Alliance Global Group is currently generating about 0.03 per unit of risk. If you would invest  20,037  in Honeywell International on September 1, 2024 and sell it today you would earn a total of  3,256  from holding Honeywell International or generate 16.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Honeywell International  vs.  Alliance Global Group

Honeywell International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Honeywell International displayed solid returns over the last few months and may actually be approaching a breakup point.

Alliance Global Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Alliance Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Honeywell International and Alliance Global

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

The idea behind Honeywell International and Alliance Global Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.