Correlation Between Trane Technologies and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Trane Technologies 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 Trane Technologies and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trane Technologies plc and Honeywell International, you can compare the effects of market volatilities on Trane Technologies 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 Trane Technologies with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and Honeywell International.
Diversification Opportunities for Trane Technologies and Honeywell International
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trane and Honeywell is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Trane Technologies 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 Trane Technologies plc 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 Trane Technologies i.e., Trane Technologies and Honeywell International go up and down completely randomly.
Pair Corralation between Trane Technologies and Honeywell International
Assuming the 90 days horizon Trane Technologies plc is expected to under-perform the Honeywell International. But the stock apears to be less risky and, when comparing its historical volatility, Trane Technologies plc is 1.52 times less risky than Honeywell International. The stock trades about -0.23 of its potential returns per unit of risk. The Honeywell International is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 21,175 in Honeywell International on December 1, 2024 and sell it today you would lose (660.00) from holding Honeywell International or give up 3.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trane Technologies plc vs. Honeywell International
Performance |
| Timeline |
| Trane Technologies plc |
| Honeywell International |
Trane Technologies and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trane Technologies and Honeywell International
The main advantage of trading using opposite Trane Technologies and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies 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.| Trane Technologies vs. CARSALESCOM | Trane Technologies vs. MeVis Medical Solutions | Trane Technologies vs. Advanced Medical Solutions | Trane Technologies vs. Peijia Medical Limited |
| Honeywell International vs. AGNC Investment Corp | Honeywell International vs. STORE ELECTRONIC | Honeywell International vs. ECHO INVESTMENT ZY | Honeywell International vs. HK Electric Investments |
Check out your portfolio center.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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