Correlation Between Schneider Electric and Honeywell International

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

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

Diversification Opportunities for Schneider Electric and Honeywell International

0.47

Correlation Coefficient

Schneider Electric  Honeywell International

Very weak diversification

The 3 months correlation between Schneider and Honeywell is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Schneider Electric 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 Schneider Electric SE 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 Schneider Electric i.e., Schneider Electric and Honeywell International go up and down completely randomly.

Pair Corralation between Schneider Electric and Honeywell International

Assuming the 90 days horizon Schneider Electric SE is expected to under-perform the Honeywell International. In addition to that, Schneider Electric is 1.19 times more volatile than Honeywell International. It trades about 0.0 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.01 per unit of volatility. If you would invest  21,965  in Honeywell International on September 23, 2024 and sell it today you would earn a total of  35.00  from holding Honeywell International or generate 0.16% return on investment over 90 days.

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

Schneider Electric SE  vs.  Honeywell International

Schneider Electric

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Schneider Electric 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Honeywell International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schneider Electric and Honeywell International

The main advantage of trading using opposite Schneider Electric and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric 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 Schneider Electric SE 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.