Correlation Between HONEYWELL and Air Lease

Can any of the company-specific risk be diversified away by investing in both HONEYWELL and Air Lease 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 Air Lease 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 Air Lease, you can compare the effects of market volatilities on HONEYWELL and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of HONEYWELL and Air Lease.

Diversification Opportunities for HONEYWELL and Air Lease

-0.05

Correlation Coefficient

HONEYWELL  Air Lease

Good diversification

The 3 months correlation between HONEYWELL and Air is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTL INC and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of HONEYWELL i.e., HONEYWELL and Air Lease go up and down completely randomly.

Pair Corralation between HONEYWELL and Air Lease

Assuming the 90 days trading horizon HONEYWELL INTL INC is expected to under-perform the Air Lease. But the bond apears to be less risky and, when comparing its historical volatility, HONEYWELL INTL INC is 3.72 times less risky than Air Lease. The bond trades about -0.15 of its potential returns per unit of risk. The Air Lease is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,838  in Air Lease on December 22, 2024 and sell it today you would lose (131.00) from holding Air Lease or give up 2.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

HONEYWELL INTL INC  vs.  Air Lease

HONEYWELL INTL INC

Risk-Adjusted Performance

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Air Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with HONEYWELL and Air Lease

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

The idea behind HONEYWELL INTL INC and Air Lease 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.