Correlation Between Singapore ReinsuranceLimit and Honeywell International

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

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

Diversification Opportunities for Singapore ReinsuranceLimit and Honeywell International

0.89

Correlation Coefficient

Singapore ReinsuranceLimit  Honeywell International

Very poor diversification

The 3 months correlation between Singapore and Honeywell is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Reinsurance and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Singapore ReinsuranceLimit 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 Singapore Reinsurance 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 Singapore ReinsuranceLimit i.e., Singapore ReinsuranceLimit and Honeywell International go up and down completely randomly.

Pair Corralation between Singapore ReinsuranceLimit and Honeywell International

Assuming the 90 days trading horizon Singapore ReinsuranceLimit is expected to generate 1.02 times less return on investment than Honeywell International. In addition to that, Singapore ReinsuranceLimit is 2.5 times more volatile than Honeywell International. It trades about 0.01 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.03 per unit of volatility. If you would invest  19,126  in Honeywell International on October 5, 2024 and sell it today you would earn a total of  3,024  from holding Honeywell International or generate 15.81% return on investment over 90 days.

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

Singapore Reinsurance  vs.  Honeywell International

Singapore ReinsuranceLimit

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Singapore Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Singapore ReinsuranceLimit unveiled solid returns over the last few months and may actually be approaching a breakup point.

Honeywell International

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Honeywell International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain fundamental indicators, Honeywell International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singapore ReinsuranceLimit and Honeywell International

The main advantage of trading using opposite Singapore ReinsuranceLimit and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore ReinsuranceLimit 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 Singapore Reinsurance 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..