Correlation Between HONEYWELL and NetSol Technologies

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

Diversification Opportunities for HONEYWELL and NetSol Technologies

0.07

Correlation Coefficient

HONEYWELL  NetSol Technologies

Significant diversification

The 3 months correlation between HONEYWELL and NetSol is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTL INC and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of HONEYWELL i.e., HONEYWELL and NetSol Technologies go up and down completely randomly.

Pair Corralation between HONEYWELL and NetSol Technologies

Assuming the 90 days trading horizon HONEYWELL INTL INC is expected to generate 0.27 times more return on investment than NetSol Technologies. However, HONEYWELL INTL INC is 3.64 times less risky than NetSol Technologies. It trades about -0.1 of its potential returns per unit of risk. NetSol Technologies is currently generating about -0.04 per unit of risk. If you would invest  9,653  in HONEYWELL INTL INC on December 25, 2024 and sell it today you would lose (372.00) from holding HONEYWELL INTL INC or give up 3.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

HONEYWELL INTL INC  vs.  NetSol Technologies

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

NetSol Technologies

Risk-Adjusted Performance

Very Weak

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

Pair Trading with HONEYWELL and NetSol Technologies

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

The idea behind HONEYWELL INTL INC and NetSol Technologies 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..