Correlation Between Simon Property and HONEYWELL

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

By analyzing existing cross correlation between Simon Property Group and HONEYWELL INTL INC, you can compare the effects of market volatilities on Simon Property and HONEYWELL 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 Simon Property with a short position of HONEYWELL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simon Property and HONEYWELL.

Diversification Opportunities for Simon Property and HONEYWELL

0.82

Correlation Coefficient

Simon Property  HONEYWELL

Very poor diversification

The 3 months correlation between Simon and HONEYWELL is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and HONEYWELL INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTL INC and Simon Property 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 Simon Property Group are associated (or correlated) with HONEYWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL INTL INC has no effect on the direction of Simon Property i.e., Simon Property and HONEYWELL go up and down completely randomly.

Pair Corralation between Simon Property and HONEYWELL

Assuming the 90 days trading horizon Simon Property Group is expected to under-perform the HONEYWELL. But the preferred stock apears to be less risky and, when comparing its historical volatility, Simon Property Group is 1.45 times less risky than HONEYWELL. The preferred stock trades about -0.06 of its potential returns per unit of risk. The HONEYWELL INTL INC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,217  in HONEYWELL INTL INC on October 26, 2024 and sell it today you would earn a total of  292.00  from holding HONEYWELL INTL INC or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	64.41%
Values	Daily Returns

Simon Property Group  vs.  HONEYWELL INTL INC

Simon Property Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simon Property Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady technical and fundamental indicators, Simon Property is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

HONEYWELL INTL INC

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days HONEYWELL INTL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HONEYWELL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Simon Property and HONEYWELL

The main advantage of trading using opposite Simon Property and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simon Property position performs unexpectedly, HONEYWELL 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 will offset losses from the drop in HONEYWELL's long position.

The idea behind Simon Property Group and HONEYWELL INTL INC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.