Correlation Between Honeywell Automation and Indraprastha MedicalLimited

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

Diversification Opportunities for Honeywell Automation and Indraprastha MedicalLimited

0.78

Correlation Coefficient

Honeywell Automation  Indraprastha MedicalLimited

Poor diversification

The 3 months correlation between Honeywell and Indraprastha is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Indraprastha Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indraprastha MedicalLimited 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 Indraprastha MedicalLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indraprastha MedicalLimited has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Indraprastha MedicalLimited go up and down completely randomly.

Pair Corralation between Honeywell Automation and Indraprastha MedicalLimited

Assuming the 90 days trading horizon Honeywell Automation India is expected to under-perform the Indraprastha MedicalLimited. But the stock apears to be less risky and, when comparing its historical volatility, Honeywell Automation India is 1.97 times less risky than Indraprastha MedicalLimited. The stock trades about -0.17 of its potential returns per unit of risk. The Indraprastha Medical is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  45,975  in Indraprastha Medical on November 29, 2024 and sell it today you would lose (6,985) from holding Indraprastha Medical or give up 15.19% 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.  Indraprastha Medical

Honeywell Automation

Risk-Adjusted Performance

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

Indraprastha MedicalLimited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indraprastha Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Honeywell Automation and Indraprastha MedicalLimited

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

The idea behind Honeywell Automation India and Indraprastha Medical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.