Correlation Between Talanx AG and Honeywell International

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

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

Diversification Opportunities for Talanx AG and Honeywell International

0.76

Correlation Coefficient

Talanx AG  Honeywell International

Poor diversification

The 3 months correlation between Talanx and Honeywell is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Talanx AG 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 Talanx AG 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 Talanx AG i.e., Talanx AG and Honeywell International go up and down completely randomly.

Pair Corralation between Talanx AG and Honeywell International

Assuming the 90 days horizon Talanx AG is expected to generate 1.19 times more return on investment than Honeywell International. However, Talanx AG is 1.19 times more volatile than Honeywell International. It trades about 0.11 of its potential returns per unit of risk. Honeywell International is currently generating about 0.04 per unit of risk. If you would invest  4,135  in Talanx AG on October 5, 2024 and sell it today you would earn a total of  3,990  from holding Talanx AG or generate 96.49% return on investment over 90 days.

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

Talanx AG  vs.  Honeywell International

Talanx AG

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Talanx AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Honeywell International

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Honeywell International has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Talanx AG and Honeywell International

The main advantage of trading using opposite Talanx AG and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talanx AG 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 Talanx AG 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.