Correlation Between Retail Estates and Honeywell International

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

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

Diversification Opportunities for Retail Estates and Honeywell International

-0.86

Correlation Coefficient

Retail Estates  Honeywell International

Pay attention - limited upside

The 3 months correlation between Retail and Honeywell is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and Honeywell International go up and down completely randomly.

Pair Corralation between Retail Estates and Honeywell International

Assuming the 90 days horizon Retail Estates NV is expected to generate 1.02 times more return on investment than Honeywell International. However, Retail Estates is 1.02 times more volatile than Honeywell International. It trades about 0.15 of its potential returns per unit of risk. Honeywell International is currently generating about -0.03 per unit of risk. If you would invest  5,800  in Retail Estates NV on October 10, 2024 and sell it today you would earn a total of  160.00  from holding Retail Estates NV or generate 2.76% return on investment over 90 days.

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

Retail Estates NV  vs.  Honeywell International

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Honeywell International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Honeywell International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Retail Estates and Honeywell International

The main advantage of trading using opposite Retail Estates and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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 Retail Estates NV 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.