Correlation Between HONEYWELL and Sun Country

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

Diversification Opportunities for HONEYWELL and Sun Country

-0.5

Correlation Coefficient

HONEYWELL  Sun Country

Very good diversification

The 3 months correlation between HONEYWELL and Sun is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTERNATIONAL INC and Sun Country Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Country Airlines 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 Sun Country. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Country Airlines has no effect on the direction of HONEYWELL i.e., HONEYWELL and Sun Country go up and down completely randomly.

Pair Corralation between HONEYWELL and Sun Country

Assuming the 90 days trading horizon HONEYWELL INTERNATIONAL INC is expected to generate 2.06 times more return on investment than Sun Country. However, HONEYWELL is 2.06 times more volatile than Sun Country Airlines. It trades about 0.27 of its potential returns per unit of risk. Sun Country Airlines is currently generating about 0.23 per unit of risk. If you would invest  6,343  in HONEYWELL INTERNATIONAL INC on October 26, 2024 and sell it today you would earn a total of  1,119  from holding HONEYWELL INTERNATIONAL INC or generate 17.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.22%
Values	Daily Returns

HONEYWELL INTERNATIONAL INC  vs.  Sun Country Airlines

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HONEYWELL INTERNATIONAL INC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, HONEYWELL sustained solid returns over the last few months and may actually be approaching a breakup point.

Sun Country Airlines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Sun Country showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HONEYWELL and Sun Country

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

The idea behind HONEYWELL INTERNATIONAL INC and Sun Country Airlines 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.