Correlation Between Honeywell International and Ayala

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

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

Diversification Opportunities for Honeywell International and Ayala

0.24

Correlation Coefficient

Honeywell International  Ayala

Modest diversification

The 3 months correlation between Honeywell and Ayala is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Ayala in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala 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 Ayala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala has no effect on the direction of Honeywell International i.e., Honeywell International and Ayala go up and down completely randomly.

Pair Corralation between Honeywell International and Ayala

Considering the 90-day investment horizon Honeywell International is expected to generate 0.49 times more return on investment than Ayala. However, Honeywell International is 2.05 times less risky than Ayala. It trades about 0.45 of its potential returns per unit of risk. Ayala is currently generating about 0.22 per unit of risk. If you would invest  20,467  in Honeywell International on September 1, 2024 and sell it today you would earn a total of  2,826  from holding Honeywell International or generate 13.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Honeywell International  vs.  Ayala

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.

Ayala

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ayala are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Ayala reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honeywell International and Ayala

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

The idea behind Honeywell International and Ayala 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.