Correlation Between Honeywell International and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Illinois Tool 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 Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Illinois Tool Works, you can compare the effects of market volatilities on Honeywell International and Illinois Tool 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 Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Illinois Tool.
Diversification Opportunities for Honeywell International and Illinois Tool
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Honeywell and Illinois is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works 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 Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Honeywell International i.e., Honeywell International and Illinois Tool go up and down completely randomly.
Pair Corralation between Honeywell International and Illinois Tool
Assuming the 90 days horizon Honeywell International is expected to generate 1.88 times more return on investment than Illinois Tool. However, Honeywell International is 1.88 times more volatile than Illinois Tool Works. It trades about 0.25 of its potential returns per unit of risk. Illinois Tool Works is currently generating about 0.36 per unit of risk. If you would invest 19,245 in Honeywell International on August 25, 2024 and sell it today you would earn a total of 2,160 from holding Honeywell International or generate 11.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Honeywell International vs. Illinois Tool Works
Performance |
| Timeline |
| Honeywell International |
| Illinois Tool Works |
Honeywell International and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Illinois Tool
The main advantage of trading using opposite Honeywell International and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.| Honeywell International vs. Superior Plus Corp | Honeywell International vs. NMI Holdings | Honeywell International vs. Origin Agritech | Honeywell International vs. SIVERS SEMICONDUCTORS AB |
| Illinois Tool vs. Superior Plus Corp | Illinois Tool vs. NMI Holdings | Illinois Tool vs. Origin Agritech | Illinois Tool vs. SIVERS SEMICONDUCTORS AB |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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