Correlation Between HONEYWELL and AerCap Holdings

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

Diversification Opportunities for HONEYWELL and AerCap Holdings

0.02

Correlation Coefficient

HONEYWELL  AerCap Holdings

Significant diversification

The 3 months correlation between HONEYWELL and AerCap is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTERNATIONAL INC and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV 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 AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of HONEYWELL i.e., HONEYWELL and AerCap Holdings go up and down completely randomly.

Pair Corralation between HONEYWELL and AerCap Holdings

Assuming the 90 days trading horizon HONEYWELL INTERNATIONAL INC is expected to under-perform the AerCap Holdings. In addition to that, HONEYWELL is 1.19 times more volatile than AerCap Holdings NV. It trades about -0.06 of its total potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.0 per unit of volatility. If you would invest  9,584  in AerCap Holdings NV on October 26, 2024 and sell it today you would lose (56.00) from holding AerCap Holdings NV or give up 0.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HONEYWELL INTERNATIONAL INC  vs.  AerCap Holdings NV

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

AerCap Holdings NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AerCap Holdings NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, AerCap Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with HONEYWELL and AerCap Holdings

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

The idea behind HONEYWELL INTERNATIONAL INC and AerCap Holdings NV 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.