Correlation Between Honeywell International and McPhy Energy
Can any of the company-specific risk be diversified away by investing in both Honeywell International and McPhy Energy 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 McPhy Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and McPhy Energy SA, you can compare the effects of market volatilities on Honeywell International and McPhy Energy 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 McPhy Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and McPhy Energy.
Diversification Opportunities for Honeywell International and McPhy Energy
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Honeywell and McPhy is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and McPhy Energy SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McPhy Energy SA 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 McPhy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McPhy Energy SA has no effect on the direction of Honeywell International i.e., Honeywell International and McPhy Energy go up and down completely randomly.
Pair Corralation between Honeywell International and McPhy Energy
Assuming the 90 days horizon Honeywell International is expected to generate 0.49 times more return on investment than McPhy Energy. However, Honeywell International is 2.03 times less risky than McPhy Energy. It trades about 0.22 of its potential returns per unit of risk. McPhy Energy SA is currently generating about -0.44 per unit of risk. If you would invest 18,334 in Honeywell International on August 30, 2024 and sell it today you would earn a total of 3,456 from holding Honeywell International or generate 18.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honeywell International vs. McPhy Energy SA
Performance |
| Timeline |
| Honeywell International |
| McPhy Energy SA |
Honeywell International and McPhy Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and McPhy Energy
The main advantage of trading using opposite Honeywell International and McPhy Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, McPhy Energy 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 McPhy Energy will offset losses from the drop in McPhy Energy's long position.| Honeywell International vs. USWE SPORTS AB | Honeywell International vs. ARISTOCRAT LEISURE | Honeywell International vs. PLAYTIKA HOLDING DL 01 | Honeywell International vs. MACOM Technology Solutions |
| McPhy Energy vs. Lion One Metals | McPhy Energy vs. LION ONE METALS | McPhy Energy vs. GREENX METALS LTD | McPhy Energy vs. FIREWEED METALS P |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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