Correlation Between Shanghai Industrial and Honeywell International

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

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

Diversification Opportunities for Shanghai Industrial and Honeywell International

0.0

Correlation Coefficient

Shanghai Industrial  Honeywell International

Pay attention - limited upside

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

Pair Corralation between Shanghai Industrial and Honeywell International

Assuming the 90 days horizon Shanghai Industrial Holdings is expected to generate 3.38 times more return on investment than Honeywell International. However, Shanghai Industrial is 3.38 times more volatile than Honeywell International. It trades about 0.01 of its potential returns per unit of risk. Honeywell International is currently generating about 0.03 per unit of risk. If you would invest  124.00  in Shanghai Industrial Holdings on October 10, 2024 and sell it today you would lose (9.00) from holding Shanghai Industrial Holdings or give up 7.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	44.65%
Values	Daily Returns

Shanghai Industrial Holdings  vs.  Honeywell International

Shanghai Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Shanghai Industrial 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

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Honeywell International is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Industrial and Honeywell International

The main advantage of trading using opposite Shanghai Industrial and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Industrial 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 Shanghai Industrial Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.