Correlation Between Old Dominion and HONEYWELL

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

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

Diversification Opportunities for Old Dominion and HONEYWELL

0.25

Correlation Coefficient

Old Dominion  HONEYWELL

Modest diversification

The 3 months correlation between Old and HONEYWELL is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL and Old Dominion 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 Old Dominion Freight 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 Old Dominion i.e., Old Dominion and HONEYWELL go up and down completely randomly.

Pair Corralation between Old Dominion and HONEYWELL

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the HONEYWELL. In addition to that, Old Dominion is 3.06 times more volatile than HONEYWELL INTERNATIONAL INC. It trades about -0.02 of its total potential returns per unit of risk. HONEYWELL INTERNATIONAL INC is currently generating about 0.01 per unit of volatility. If you would invest  8,114  in HONEYWELL INTERNATIONAL INC on October 7, 2024 and sell it today you would earn a total of  104.00  from holding HONEYWELL INTERNATIONAL INC or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.56%
Values	Daily Returns

Old Dominion Freight  vs.  HONEYWELL INTERNATIONAL INC

Old Dominion Freight

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Old Dominion and HONEYWELL

The main advantage of trading using opposite Old Dominion and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion 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 Old Dominion Freight 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.