Correlation Between Xp and Honeywell International

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

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

Diversification Opportunities for Xp and Honeywell International

-0.68

Correlation Coefficient

Xp  Honeywell International

Excellent diversification

The 3 months correlation between Xp and Honeywell is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Xp 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 Xp Inc 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 Xp i.e., Xp and Honeywell International go up and down completely randomly.

Pair Corralation between Xp and Honeywell International

Assuming the 90 days trading horizon Xp Inc is expected to under-perform the Honeywell International. In addition to that, Xp is 1.09 times more volatile than Honeywell International. It trades about -0.15 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.17 per unit of volatility. If you would invest  115,571  in Honeywell International on September 4, 2024 and sell it today you would earn a total of  24,124  from holding Honeywell International or generate 20.87% return on investment over 90 days.

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

Xp Inc  vs.  Honeywell International

Xp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat 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

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Honeywell International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xp and Honeywell International

The main advantage of trading using opposite Xp and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xp 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 Xp Inc 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.