Correlation Between Honeywell Automation and Aarey Drugs

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

By analyzing existing cross correlation between Honeywell Automation India and Aarey Drugs Pharmaceuticals, you can compare the effects of market volatilities on Honeywell Automation and Aarey Drugs 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 Automation with a short position of Aarey Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell Automation and Aarey Drugs.

Diversification Opportunities for Honeywell Automation and Aarey Drugs

0.7

Correlation Coefficient

Honeywell Automation  Aarey Drugs

Poor diversification

The 3 months correlation between Honeywell and Aarey is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Aarey Drugs Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarey Drugs Pharmace and Honeywell Automation 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 Automation India are associated (or correlated) with Aarey Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarey Drugs Pharmace has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Aarey Drugs go up and down completely randomly.

Pair Corralation between Honeywell Automation and Aarey Drugs

Assuming the 90 days trading horizon Honeywell Automation India is expected to under-perform the Aarey Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Honeywell Automation India is 1.49 times less risky than Aarey Drugs. The stock trades about -0.2 of its potential returns per unit of risk. The Aarey Drugs Pharmaceuticals is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  7,126  in Aarey Drugs Pharmaceuticals on August 31, 2024 and sell it today you would lose (1,309) from holding Aarey Drugs Pharmaceuticals or give up 18.37% of portfolio value over 90 days.

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

Honeywell Automation India  vs.  Aarey Drugs Pharmaceuticals

Honeywell Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Honeywell Automation India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Aarey Drugs Pharmace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarey Drugs Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Honeywell Automation and Aarey Drugs

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

The idea behind Honeywell Automation India and Aarey Drugs Pharmaceuticals 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.