Correlation Between HONEYWELL and Nuvalent

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

Diversification Opportunities for HONEYWELL and Nuvalent

0.43

Correlation Coefficient

HONEYWELL  Nuvalent

Very weak diversification

The 3 months correlation between HONEYWELL and Nuvalent is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTL INC and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent 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 Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of HONEYWELL i.e., HONEYWELL and Nuvalent go up and down completely randomly.

Pair Corralation between HONEYWELL and Nuvalent

Assuming the 90 days trading horizon HONEYWELL INTL INC is expected to generate 0.44 times more return on investment than Nuvalent. However, HONEYWELL INTL INC is 2.29 times less risky than Nuvalent. It trades about 0.16 of its potential returns per unit of risk. Nuvalent is currently generating about -0.03 per unit of risk. If you would invest  7,699  in HONEYWELL INTL INC on December 25, 2024 and sell it today you would earn a total of  420.00  from holding HONEYWELL INTL INC or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	49.15%
Values	Daily Returns

HONEYWELL INTL INC  vs.  Nuvalent

HONEYWELL INTL INC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HONEYWELL INTL INC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, HONEYWELL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nuvalent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Nuvalent 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 Nuvalent

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

The idea behind HONEYWELL INTL INC and Nuvalent 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.

Check out your portfolio center.

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.