Correlation Between HONEYWELL and Western Digital

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

Diversification Opportunities for HONEYWELL and Western Digital

0.51

Correlation Coefficient

HONEYWELL  Western Digital

Very weak diversification

The 3 months correlation between HONEYWELL and Western is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTL INC and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of HONEYWELL i.e., HONEYWELL and Western Digital go up and down completely randomly.

Pair Corralation between HONEYWELL and Western Digital

Assuming the 90 days trading horizon HONEYWELL INTL INC is expected to under-perform the Western Digital. But the bond apears to be less risky and, when comparing its historical volatility, HONEYWELL INTL INC is 7.88 times less risky than Western Digital. The bond trades about -0.1 of its potential returns per unit of risk. The Western Digital is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,661  in Western Digital on October 23, 2024 and sell it today you would lose (157.00) from holding Western Digital or give up 2.36% of portfolio value over 90 days.

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

HONEYWELL INTL INC  vs.  Western Digital

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.

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Western Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HONEYWELL and Western Digital

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

The idea behind HONEYWELL INTL INC and Western Digital 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.