Correlation Between Obayashi and HONEYWELL

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

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

Diversification Opportunities for Obayashi and HONEYWELL

0.11

Correlation Coefficient

Obayashi  HONEYWELL

Average diversification

The 3 months correlation between Obayashi and HONEYWELL is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL and Obayashi 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 Obayashi 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 INTERNATIONAL has no effect on the direction of Obayashi i.e., Obayashi and HONEYWELL go up and down completely randomly.

Pair Corralation between Obayashi and HONEYWELL

Assuming the 90 days horizon Obayashi is expected to under-perform the HONEYWELL. But the pink sheet apears to be less risky and, when comparing its historical volatility, Obayashi is 1.31 times less risky than HONEYWELL. The pink sheet trades about -0.22 of its potential returns per unit of risk. The HONEYWELL INTERNATIONAL INC is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  9,329  in HONEYWELL INTERNATIONAL INC on October 10, 2024 and sell it today you would lose (539.00) from holding HONEYWELL INTERNATIONAL INC or give up 5.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Obayashi  vs.  HONEYWELL INTERNATIONAL INC

Obayashi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Obayashi are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Obayashi reported solid returns over the last few months and may actually be approaching a breakup point.

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HONEYWELL INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HONEYWELL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Obayashi and HONEYWELL

The main advantage of trading using opposite Obayashi and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Obayashi 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 Obayashi and HONEYWELL INTERNATIONAL 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.