Correlation Between Honeywell Automation and Chalet Hotels

Can any of the company-specific risk be diversified away by investing in both Honeywell Automation and Chalet Hotels 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 Chalet Hotels 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 Chalet Hotels Limited, you can compare the effects of market volatilities on Honeywell Automation and Chalet Hotels 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 Chalet Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell Automation and Chalet Hotels.

Diversification Opportunities for Honeywell Automation and Chalet Hotels

-0.5

Correlation Coefficient

Honeywell Automation  Chalet Hotels

Very good diversification

The 3 months correlation between Honeywell and Chalet is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Chalet Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chalet Hotels Limited 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 Chalet Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chalet Hotels Limited has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Chalet Hotels go up and down completely randomly.

Pair Corralation between Honeywell Automation and Chalet Hotels

Assuming the 90 days trading horizon Honeywell Automation is expected to generate 11.36 times less return on investment than Chalet Hotels. But when comparing it to its historical volatility, Honeywell Automation India is 1.24 times less risky than Chalet Hotels. It trades about 0.01 of its potential returns per unit of risk. Chalet Hotels Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  34,015  in Chalet Hotels Limited on October 11, 2024 and sell it today you would earn a total of  60,010  from holding Chalet Hotels Limited or generate 176.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Honeywell Automation India  vs.  Chalet Hotels Limited

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chalet Hotels Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chalet Hotels Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Chalet Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Honeywell Automation and Chalet Hotels

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

The idea behind Honeywell Automation India and Chalet Hotels Limited 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.