Correlation Between Keppel and Honeywell International

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

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

Diversification Opportunities for Keppel and Honeywell International

0.02

Correlation Coefficient

Keppel  Honeywell International

Significant diversification

The 3 months correlation between Keppel and Honeywell is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Keppel Limited and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Keppel 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 Keppel Limited are associated (or correlated) with Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Keppel i.e., Keppel and Honeywell International go up and down completely randomly.

Pair Corralation between Keppel and Honeywell International

Assuming the 90 days horizon Keppel Limited is expected to generate 2.28 times more return on investment than Honeywell International. However, Keppel is 2.28 times more volatile than Honeywell International. It trades about -0.01 of its potential returns per unit of risk. Honeywell International is currently generating about -0.14 per unit of risk. If you would invest  1,021  in Keppel Limited on October 12, 2024 and sell it today you would lose (15.00) from holding Keppel Limited or give up 1.47% of portfolio value over 90 days.

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

Keppel Limited  vs.  Honeywell International

Keppel Limited

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keppel Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Keppel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Honeywell International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Honeywell International is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Keppel and Honeywell International

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

The idea behind Keppel Limited and Honeywell International 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.