Correlation Between Honeywell Automation and KEI Industries

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

Diversification Opportunities for Honeywell Automation and KEI Industries

-0.12

Correlation Coefficient

Honeywell Automation  KEI Industries

Good diversification

The 3 months correlation between Honeywell and KEI is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and KEI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEI Industries 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 KEI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEI Industries has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and KEI Industries go up and down completely randomly.

Pair Corralation between Honeywell Automation and KEI Industries

Assuming the 90 days trading horizon Honeywell Automation India is expected to generate 0.89 times more return on investment than KEI Industries. However, Honeywell Automation India is 1.13 times less risky than KEI Industries. It trades about 0.18 of its potential returns per unit of risk. KEI Industries Limited is currently generating about -0.05 per unit of risk. If you would invest  4,099,280  in Honeywell Automation India on October 6, 2024 and sell it today you would earn a total of  209,000  from holding Honeywell Automation India or generate 5.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Honeywell Automation India  vs.  KEI Industries 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 inconsistent 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.

KEI Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KEI Industries Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, KEI Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Honeywell Automation and KEI Industries

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

The idea behind Honeywell Automation India and KEI Industries 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.