Correlation Between HONEYWELL and Fortress Transp

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

Diversification Opportunities for HONEYWELL and Fortress Transp

0.23

Correlation Coefficient

HONEYWELL  Fortress Transp

Modest diversification

The 3 months correlation between HONEYWELL and Fortress is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTERNATIONAL INC and Fortress Transp Infra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Transp Infra 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 Fortress Transp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Transp Infra has no effect on the direction of HONEYWELL i.e., HONEYWELL and Fortress Transp go up and down completely randomly.

Pair Corralation between HONEYWELL and Fortress Transp

Assuming the 90 days trading horizon HONEYWELL INTERNATIONAL INC is expected to generate 0.24 times more return on investment than Fortress Transp. However, HONEYWELL INTERNATIONAL INC is 4.11 times less risky than Fortress Transp. It trades about -0.07 of its potential returns per unit of risk. Fortress Transp Infra is currently generating about -0.15 per unit of risk. If you would invest  9,288  in HONEYWELL INTERNATIONAL INC on October 26, 2024 and sell it today you would lose (498.00) from holding HONEYWELL INTERNATIONAL INC or give up 5.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

HONEYWELL INTERNATIONAL INC  vs.  Fortress Transp Infra

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.

Fortress Transp Infra

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HONEYWELL and Fortress Transp

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

The idea behind HONEYWELL INTERNATIONAL INC and Fortress Transp Infra 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.