Correlation Between Honeywell Automation and Procter Gamble

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

Diversification Opportunities for Honeywell Automation and Procter Gamble

-0.07

Correlation Coefficient

Honeywell Automation  Procter Gamble

Good diversification

The 3 months correlation between Honeywell and Procter is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Procter Gamble Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble Health 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble Health has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Procter Gamble go up and down completely randomly.

Pair Corralation between Honeywell Automation and Procter Gamble

Assuming the 90 days trading horizon Honeywell Automation India is expected to under-perform the Procter Gamble. But the stock apears to be less risky and, when comparing its historical volatility, Honeywell Automation India is 1.12 times less risky than Procter Gamble. The stock trades about -0.2 of its potential returns per unit of risk. The Procter Gamble Health is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  516,489  in Procter Gamble Health on August 31, 2024 and sell it today you would earn a total of  366.00  from holding Procter Gamble Health or generate 0.07% return on investment over 90 days.

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

Honeywell Automation India  vs.  Procter Gamble Health

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 uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Procter Gamble Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Procter Gamble 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 Procter Gamble

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

The idea behind Honeywell Automation India and Procter Gamble Health 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 Transaction History module to view history of all your transactions and understand their impact on performance.