Correlation Between HONEYWELL and Fast Retailing

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

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

Diversification Opportunities for HONEYWELL and Fast Retailing

-0.26

Correlation Coefficient

HONEYWELL  Fast Retailing

Very good diversification

The 3 months correlation between HONEYWELL and Fast is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTL INC and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and HONEYWELL 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 HONEYWELL INTL INC are associated (or correlated) with Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of HONEYWELL i.e., HONEYWELL and Fast Retailing go up and down completely randomly.

Pair Corralation between HONEYWELL and Fast Retailing

Assuming the 90 days trading horizon HONEYWELL INTL INC is expected to under-perform the Fast Retailing. But the bond apears to be less risky and, when comparing its historical volatility, HONEYWELL INTL INC is 1.41 times less risky than Fast Retailing. The bond trades about -0.18 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  33,100  in Fast Retailing Co on August 30, 2024 and sell it today you would lose (1,035) from holding Fast Retailing Co or give up 3.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

HONEYWELL INTL INC  vs.  Fast Retailing Co

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 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.

Fast Retailing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fast Retailing is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HONEYWELL and Fast Retailing

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

The idea behind HONEYWELL INTL INC and Fast Retailing Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.