Correlation Between HONEYWELL and Dominos Pizza

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

By analyzing existing cross correlation between HONEYWELL INTERNATIONAL INC and Dominos Pizza Common, you can compare the effects of market volatilities on HONEYWELL and Dominos Pizza 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 Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of HONEYWELL and Dominos Pizza.

Diversification Opportunities for HONEYWELL and Dominos Pizza

0.4

Correlation Coefficient

HONEYWELL  Dominos Pizza

Very weak diversification

The 3 months correlation between HONEYWELL and Dominos is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTERNATIONAL INC and Dominos Pizza Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Common 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 INTERNATIONAL INC are associated (or correlated) with Dominos Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza Common has no effect on the direction of HONEYWELL i.e., HONEYWELL and Dominos Pizza go up and down completely randomly.

Pair Corralation between HONEYWELL and Dominos Pizza

Assuming the 90 days trading horizon HONEYWELL INTERNATIONAL INC is expected to under-perform the Dominos Pizza. But the bond apears to be less risky and, when comparing its historical volatility, HONEYWELL INTERNATIONAL INC is 5.51 times less risky than Dominos Pizza. The bond trades about -0.03 of its potential returns per unit of risk. The Dominos Pizza Common is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  42,925  in Dominos Pizza Common on December 24, 2024 and sell it today you would earn a total of  3,215  from holding Dominos Pizza Common or generate 7.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

HONEYWELL INTERNATIONAL INC  vs.  Dominos Pizza Common

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days HONEYWELL INTERNATIONAL 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.

Dominos Pizza Common

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dominos Pizza may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HONEYWELL and Dominos Pizza

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

The idea behind HONEYWELL INTERNATIONAL INC and Dominos Pizza Common 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.