Correlation Between Honeywell International and Sekisui Chemical

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

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

Diversification Opportunities for Honeywell International and Sekisui Chemical

-0.66

Correlation Coefficient

Honeywell International  Sekisui Chemical

Excellent diversification

The 3 months correlation between Honeywell and Sekisui is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical 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 Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of Honeywell International i.e., Honeywell International and Sekisui Chemical go up and down completely randomly.

Pair Corralation between Honeywell International and Sekisui Chemical

Considering the 90-day investment horizon Honeywell International is expected to under-perform the Sekisui Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Honeywell International is 1.81 times less risky than Sekisui Chemical. The stock trades about -0.09 of its potential returns per unit of risk. The Sekisui Chemical Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,550  in Sekisui Chemical Co on December 22, 2024 and sell it today you would earn a total of  222.00  from holding Sekisui Chemical Co or generate 14.32% return on investment over 90 days.

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

Honeywell International  vs.  Sekisui Chemical Co

Honeywell International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honeywell International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sekisui Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sekisui Chemical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honeywell International and Sekisui Chemical

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

The idea behind Honeywell International and Sekisui Chemical Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.