Correlation Between Rama Steel and Honeywell Automation

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

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

Diversification Opportunities for Rama Steel and Honeywell Automation

0.23

Correlation Coefficient

Rama Steel  Honeywell Automation

Modest diversification

The 3 months correlation between Rama and Honeywell is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Honeywell Automation India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell Automation and Rama Steel 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 Rama Steel Tubes 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 Rama Steel i.e., Rama Steel and Honeywell Automation go up and down completely randomly.

Pair Corralation between Rama Steel and Honeywell Automation

Assuming the 90 days trading horizon Rama Steel Tubes is expected to generate 1.85 times more return on investment than Honeywell Automation. However, Rama Steel is 1.85 times more volatile than Honeywell Automation India. It trades about 0.04 of its potential returns per unit of risk. Honeywell Automation India is currently generating about -0.15 per unit of risk. If you would invest  1,210  in Rama Steel Tubes on October 26, 2024 and sell it today you would earn a total of  60.00  from holding Rama Steel Tubes or generate 4.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Rama Steel Tubes  vs.  Honeywell Automation India

Rama Steel Tubes

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rama Steel Tubes are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Rama Steel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 uncertain 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 Rama Steel and Honeywell Automation

The main advantage of trading using opposite Rama Steel and Honeywell Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rama Steel 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 Rama Steel Tubes 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.