Correlation Between Summit Materials and HONEYWELL

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

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

Diversification Opportunities for Summit Materials and HONEYWELL

-0.1

Correlation Coefficient

Summit Materials  HONEYWELL

Good diversification

The 3 months correlation between Summit and HONEYWELL is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials 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 Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and HONEYWELL go up and down completely randomly.

Pair Corralation between Summit Materials and HONEYWELL

Considering the 90-day investment horizon Summit Materials is expected to generate 0.27 times more return on investment than HONEYWELL. However, Summit Materials is 3.64 times less risky than HONEYWELL. It trades about 0.1 of its potential returns per unit of risk. HONEYWELL INTL INC is currently generating about -0.78 per unit of risk. If you would invest  5,082  in Summit Materials on October 8, 2024 and sell it today you would earn a total of  28.00  from holding Summit Materials or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.11%
Values	Daily Returns

Summit Materials  vs.  HONEYWELL INTL INC

Summit Materials

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

HONEYWELL INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HONEYWELL INTL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HONEYWELL INTL INC investors.

Pair Trading with Summit Materials and HONEYWELL

The main advantage of trading using opposite Summit Materials and HONEYWELL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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 Summit Materials 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.