Correlation Between HONEYWELL and LAir Liquide

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

Diversification Opportunities for HONEYWELL and LAir Liquide

0.34

Correlation Coefficient

HONEYWELL  LAir Liquide

Weak diversification

The 3 months correlation between HONEYWELL and LAir is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTERNATIONAL INC and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA 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 LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of HONEYWELL i.e., HONEYWELL and LAir Liquide go up and down completely randomly.

Pair Corralation between HONEYWELL and LAir Liquide

Assuming the 90 days trading horizon HONEYWELL INTERNATIONAL INC is expected to under-perform the LAir Liquide. But the bond apears to be less risky and, when comparing its historical volatility, HONEYWELL INTERNATIONAL INC is 1.79 times less risky than LAir Liquide. The bond trades about -0.21 of its potential returns per unit of risk. The LAir Liquide SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  16,146  in LAir Liquide SA on October 26, 2024 and sell it today you would earn a total of  1,052  from holding LAir Liquide SA or generate 6.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

HONEYWELL INTERNATIONAL INC  vs.  LAir Liquide SA

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

0 of 100

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

LAir Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAir Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HONEYWELL and LAir Liquide

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

The idea behind HONEYWELL INTERNATIONAL INC and LAir Liquide SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.