Correlation Between Honeywell International and Cummins
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Cummins 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 Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Cummins, you can compare the effects of market volatilities on Honeywell International and Cummins 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 Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Cummins.
Diversification Opportunities for Honeywell International and Cummins
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Honeywell and Cummins is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Honeywell International i.e., Honeywell International and Cummins go up and down completely randomly.
Pair Corralation between Honeywell International and Cummins
Assuming the 90 days horizon Honeywell International is expected to generate 1.85 times less return on investment than Cummins. In addition to that, Honeywell International is 1.11 times more volatile than Cummins. It trades about 0.14 of its total potential returns per unit of risk. Cummins is currently generating about 0.29 per unit of volatility. If you would invest 25,886 in Cummins on September 5, 2024 and sell it today you would earn a total of 10,094 from holding Cummins or generate 38.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honeywell International vs. Cummins
Performance |
| Timeline |
| Honeywell International |
| Cummins |
Honeywell International and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Cummins
The main advantage of trading using opposite Honeywell International and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| Honeywell International vs. EMBARK EDUCATION LTD | Honeywell International vs. ETFS Coffee ETC | Honeywell International vs. United Breweries Co | Honeywell International vs. Thai Beverage Public |
| Cummins vs. NetSol Technologies | Cummins vs. Digilife Technologies Limited | Cummins vs. FARO Technologies | Cummins vs. THORNEY TECHS LTD |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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