Correlation Between Modi Rubber and Honeywell Automation

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

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

Diversification Opportunities for Modi Rubber and Honeywell Automation

-0.18

Correlation Coefficient

Modi Rubber  Honeywell Automation

Good diversification

The 3 months correlation between Modi and Honeywell is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Modi Rubber 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 Modi Rubber 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 Modi Rubber 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 Modi Rubber i.e., Modi Rubber and Honeywell Automation go up and down completely randomly.

Pair Corralation between Modi Rubber and Honeywell Automation

Assuming the 90 days trading horizon Modi Rubber Limited is expected to generate 1.36 times more return on investment than Honeywell Automation. However, Modi Rubber is 1.36 times more volatile than Honeywell Automation India. It trades about 0.0 of its potential returns per unit of risk. Honeywell Automation India is currently generating about -0.19 per unit of risk. If you would invest  11,709  in Modi Rubber Limited on October 25, 2024 and sell it today you would lose (191.00) from holding Modi Rubber Limited or give up 1.63% of portfolio value over 90 days.

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

Modi Rubber Limited  vs.  Honeywell Automation India

Modi Rubber Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modi Rubber Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Modi Rubber is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 weak 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 Modi Rubber and Honeywell Automation

The main advantage of trading using opposite Modi Rubber and Honeywell Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modi Rubber 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 Modi Rubber 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.