Correlation Between Jubilant Foodworks and Honeywell Automation

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

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

Diversification Opportunities for Jubilant Foodworks and Honeywell Automation

-0.58

Correlation Coefficient

Jubilant Foodworks  Honeywell Automation

Excellent diversification

The 3 months correlation between Jubilant and Honeywell is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks Limited and Honeywell Automation India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell Automation and Jubilant Foodworks 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 Jubilant Foodworks Limited are associated (or correlated) with Honeywell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell Automation has no effect on the direction of Jubilant Foodworks i.e., Jubilant Foodworks and Honeywell Automation go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and Honeywell Automation

Assuming the 90 days trading horizon Jubilant Foodworks Limited is expected to generate 1.35 times more return on investment than Honeywell Automation. However, Jubilant Foodworks is 1.35 times more volatile than Honeywell Automation India. It trades about 0.08 of its potential returns per unit of risk. Honeywell Automation India is currently generating about -0.15 per unit of risk. If you would invest  58,225  in Jubilant Foodworks Limited on October 22, 2024 and sell it today you would earn a total of  11,045  from holding Jubilant Foodworks Limited or generate 18.97% return on investment over 90 days.

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

Jubilant Foodworks Limited  vs.  Honeywell Automation India

Jubilant Foodworks

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilant Foodworks Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Jubilant Foodworks displayed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Jubilant Foodworks and Honeywell Automation

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

The idea behind Jubilant Foodworks Limited and Honeywell Automation India 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.