Correlation Between Honeywell International and ABB
Can any of the company-specific risk be diversified away by investing in both Honeywell International and ABB 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 International and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and ABB, you can compare the effects of market volatilities on Honeywell International and ABB 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 International with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and ABB.
Diversification Opportunities for Honeywell International and ABB
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Honeywell and ABB is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Honeywell International 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 are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Honeywell International i.e., Honeywell International and ABB go up and down completely randomly.
Pair Corralation between Honeywell International and ABB
Assuming the 90 days horizon Honeywell International is expected to generate 0.8 times more return on investment than ABB. However, Honeywell International is 1.25 times less risky than ABB. It trades about 0.32 of its potential returns per unit of risk. ABB is currently generating about 0.06 per unit of risk. If you would invest 18,738 in Honeywell International on September 1, 2024 and sell it today you would earn a total of 2,892 from holding Honeywell International or generate 15.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Honeywell International vs. ABB
Performance |
| Timeline |
| Honeywell International |
| ABB |
Honeywell International and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and ABB
The main advantage of trading using opposite Honeywell International and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| Honeywell International vs. Pick n Pay | Honeywell International vs. PICKN PAY STORES | Honeywell International vs. Harmony Gold Mining | Honeywell International vs. LION ONE METALS |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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