Correlation Between United States and Honeywell International

Can any of the company-specific risk be diversified away by investing in both United States and Honeywell International 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 United States and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United States Steel and Honeywell International, you can compare the effects of market volatilities on United States and Honeywell International 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 United States with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Honeywell International.

Diversification Opportunities for United States and Honeywell International

0.33

Correlation Coefficient

United States  Honeywell International

Weak diversification

The 3 months correlation between United and Honeywell is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and United States 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 United States Steel are associated (or correlated) with Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of United States i.e., United States and Honeywell International go up and down completely randomly.

Pair Corralation between United States and Honeywell International

Given the investment horizon of 90 days United States Steel is expected to under-perform the Honeywell International. In addition to that, United States is 2.21 times more volatile than Honeywell International. It trades about -0.16 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.08 per unit of volatility. If you would invest  437,882  in Honeywell International on September 23, 2024 and sell it today you would earn a total of  20,467  from holding Honeywell International or generate 4.67% return on investment over 90 days.

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

United States Steel  vs.  Honeywell International

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Honeywell International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Honeywell International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Honeywell International

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

The idea behind United States Steel and Honeywell International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.