Correlation Between Kaiser Aluminum and HONEYWELL

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

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

Diversification Opportunities for Kaiser Aluminum and HONEYWELL

-0.07

Correlation Coefficient

Kaiser Aluminum  HONEYWELL

Good diversification

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

Pair Corralation between Kaiser Aluminum and HONEYWELL

Given the investment horizon of 90 days Kaiser Aluminum is expected to under-perform the HONEYWELL. In addition to that, Kaiser Aluminum is 1.72 times more volatile than HONEYWELL INTL INC. It trades about -0.03 of its total potential returns per unit of risk. HONEYWELL INTL INC is currently generating about 0.16 per unit of volatility. If you would invest  7,699  in HONEYWELL INTL INC on December 25, 2024 and sell it today you would earn a total of  420.00  from holding HONEYWELL INTL INC or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.33%
Values	Daily Returns

Kaiser Aluminum  vs.  HONEYWELL INTL INC

Kaiser Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

HONEYWELL INTL INC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HONEYWELL INTL INC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, HONEYWELL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kaiser Aluminum and HONEYWELL

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

The idea behind Kaiser Aluminum and HONEYWELL INTL INC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.