Correlation Between Honeywell Automation and Dynamic Cables

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

Diversification Opportunities for Honeywell Automation and Dynamic Cables

-0.93

Correlation Coefficient

Honeywell Automation  Dynamic Cables

Pay attention - limited upside

The 3 months correlation between Honeywell and Dynamic is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Dynamic Cables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Cables 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 Dynamic Cables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Cables has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Dynamic Cables go up and down completely randomly.

Pair Corralation between Honeywell Automation and Dynamic Cables

Assuming the 90 days trading horizon Honeywell Automation is expected to generate 7.14 times less return on investment than Dynamic Cables. But when comparing it to its historical volatility, Honeywell Automation India is 2.07 times less risky than Dynamic Cables. It trades about 0.03 of its potential returns per unit of risk. Dynamic Cables Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  45,225  in Dynamic Cables Limited on October 5, 2024 and sell it today you would earn a total of  58,600  from holding Dynamic Cables Limited or generate 129.57% return on investment over 90 days.

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

Honeywell Automation India  vs.  Dynamic Cables 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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dynamic Cables

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Cables Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Dynamic Cables unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honeywell Automation and Dynamic Cables

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

The idea behind Honeywell Automation India and Dynamic Cables 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.