Correlation Between Honeywell Automation and Servotech Power

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

Diversification Opportunities for Honeywell Automation and Servotech Power

0.26

Correlation Coefficient

Honeywell Automation  Servotech Power

Modest diversification

The 3 months correlation between Honeywell and Servotech is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Servotech Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotech Power Systems 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 Servotech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotech Power Systems has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Servotech Power go up and down completely randomly.

Pair Corralation between Honeywell Automation and Servotech Power

Assuming the 90 days trading horizon Honeywell Automation India is expected to generate 0.75 times more return on investment than Servotech Power. However, Honeywell Automation India is 1.33 times less risky than Servotech Power. It trades about 0.18 of its potential returns per unit of risk. Servotech Power Systems is currently generating about -0.13 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Honeywell Automation India  vs.  Servotech Power Systems

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.

Servotech Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Servotech Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Servotech Power is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Honeywell Automation and Servotech Power

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

The idea behind Honeywell Automation India and Servotech Power Systems 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.