Correlation Between Nuvalent and HONEYWELL

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

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

Diversification Opportunities for Nuvalent and HONEYWELL

0.43

Correlation Coefficient

Nuvalent  HONEYWELL

Very weak diversification

The 3 months correlation between Nuvalent and HONEYWELL is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent 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 Nuvalent 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 Nuvalent 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 Nuvalent i.e., Nuvalent and HONEYWELL go up and down completely randomly.

Pair Corralation between Nuvalent and HONEYWELL

Given the investment horizon of 90 days Nuvalent is expected to under-perform the HONEYWELL. In addition to that, Nuvalent is 2.29 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 Together
Strength	Weak
Accuracy	49.15%
Values	Daily Returns

Nuvalent  vs.  HONEYWELL INTL INC

Nuvalent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Nuvalent is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional 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 Nuvalent and HONEYWELL

The main advantage of trading using opposite Nuvalent and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuvalent 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 Nuvalent 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.