Correlation Between HONEYWELL and Procter Gamble

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

Diversification Opportunities for HONEYWELL and Procter Gamble

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Correlation Coefficient

HONEYWELL  Procter Gamble

Pay attention - limited upside

The 3 months correlation between HONEYWELL and Procter is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTERNATIONAL INC and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of HONEYWELL i.e., HONEYWELL and Procter Gamble go up and down completely randomly.

Pair Corralation between HONEYWELL and Procter Gamble

Assuming the 90 days trading horizon HONEYWELL INTERNATIONAL INC is expected to under-perform the Procter Gamble. In addition to that, HONEYWELL is 1.23 times more volatile than Procter Gamble. It trades about -0.04 of its total potential returns per unit of risk. Procter Gamble is currently generating about -0.02 per unit of volatility. If you would invest  16,718  in Procter Gamble on October 8, 2024 and sell it today you would lose (205.00) from holding Procter Gamble or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

HONEYWELL INTERNATIONAL INC  vs.  Procter Gamble

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

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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.

Procter Gamble

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HONEYWELL and Procter Gamble

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

The idea behind HONEYWELL INTERNATIONAL INC and Procter Gamble 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.