Correlation Between Honeywell Automation and Elin Electronics

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

Diversification Opportunities for Honeywell Automation and Elin Electronics

0.35

Correlation Coefficient

Honeywell Automation  Elin Electronics

Weak diversification

The 3 months correlation between Honeywell and Elin is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Elin Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elin Electronics 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 Elin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elin Electronics has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Elin Electronics go up and down completely randomly.

Pair Corralation between Honeywell Automation and Elin Electronics

Assuming the 90 days trading horizon Honeywell Automation India is expected to generate 0.59 times more return on investment than Elin Electronics. However, Honeywell Automation India is 1.68 times less risky than Elin Electronics. It trades about 0.14 of its potential returns per unit of risk. Elin Electronics Limited is currently generating about -0.18 per unit of risk. If you would invest  4,085,555  in Honeywell Automation India on October 5, 2024 and sell it today you would earn a total of  151,455  from holding Honeywell Automation India or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Honeywell Automation India  vs.  Elin Electronics 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.

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Elin Electronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Honeywell Automation and Elin Electronics

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

The idea behind Honeywell Automation India and Elin Electronics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.