Correlation Between Reliance Steel and Honeywell International

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

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

Diversification Opportunities for Reliance Steel and Honeywell International

0.0

Correlation Coefficient

Reliance Steel  Honeywell International

Pay attention - limited upside

The 3 months correlation between Reliance and Honeywell is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Reliance 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 Reliance Steel Aluminum 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 Reliance Steel i.e., Reliance Steel and Honeywell International go up and down completely randomly.

Pair Corralation between Reliance Steel and Honeywell International

If you would invest (100.00) in Honeywell International on October 4, 2024 and sell it today you would earn a total of  100.00  from holding Honeywell International or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Reliance Steel Aluminum  vs.  Honeywell International

Reliance Steel Aluminum

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Reliance Steel Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reliance Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Honeywell International

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Honeywell International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Steel and Honeywell International

The main advantage of trading using opposite Reliance Steel and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel 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 Reliance Steel Aluminum 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.