Correlation Between HONEYWELL and Designer Brands

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

Diversification Opportunities for HONEYWELL and Designer Brands

-0.46

Correlation Coefficient

HONEYWELL  Designer Brands

Very good diversification

The 3 months correlation between HONEYWELL and Designer is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTERNATIONAL INC and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands 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 Designer Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Designer Brands has no effect on the direction of HONEYWELL i.e., HONEYWELL and Designer Brands go up and down completely randomly.

Pair Corralation between HONEYWELL and Designer Brands

Assuming the 90 days trading horizon HONEYWELL INTERNATIONAL INC is expected to generate 0.27 times more return on investment than Designer Brands. However, HONEYWELL INTERNATIONAL INC is 3.73 times less risky than Designer Brands. It trades about -0.1 of its potential returns per unit of risk. Designer Brands is currently generating about -0.12 per unit of risk. If you would invest  8,623  in HONEYWELL INTERNATIONAL INC on December 26, 2024 and sell it today you would lose (643.00) from holding HONEYWELL INTERNATIONAL INC or give up 7.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

HONEYWELL INTERNATIONAL INC  vs.  Designer Brands

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 latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HONEYWELL INTERNATIONAL INC investors.

Designer Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with HONEYWELL and Designer Brands

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

The idea behind HONEYWELL INTERNATIONAL INC and Designer Brands 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.