Correlation Between Honeywell International and FedEx

Can any of the company-specific risk be diversified away by investing in both Honeywell International and FedEx 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 International and FedEx into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Honeywell International and FedEx, you can compare the effects of market volatilities on Honeywell International and FedEx 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 International with a short position of FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and FedEx.

Diversification Opportunities for Honeywell International and FedEx

0.88

Correlation Coefficient

Honeywell International  FedEx

Very poor diversification

The 3 months correlation between Honeywell and FedEx is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Honeywell International 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 International are associated (or correlated) with FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Honeywell International i.e., Honeywell International and FedEx go up and down completely randomly.

Pair Corralation between Honeywell International and FedEx

Assuming the 90 days trading horizon Honeywell International is expected to generate 1.2 times more return on investment than FedEx. However, Honeywell International is 1.2 times more volatile than FedEx. It trades about 0.13 of its potential returns per unit of risk. FedEx is currently generating about -0.16 per unit of risk. If you would invest  136,106  in Honeywell International on September 29, 2024 and sell it today you would earn a total of  6,539  from holding Honeywell International or generate 4.8% return on investment over 90 days.

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

Honeywell International  vs.  FedEx

Honeywell International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Honeywell International sustained solid returns over the last few months and may actually be approaching a breakup point.

FedEx

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, FedEx sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honeywell International and FedEx

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

The idea behind Honeywell International and FedEx 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.