Correlation Between Honeywell International and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Pentair Plc 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 Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Pentair plc, you can compare the effects of market volatilities on Honeywell International and Pentair Plc 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 Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Pentair Plc.
Diversification Opportunities for Honeywell International and Pentair Plc
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Honeywell and Pentair is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc 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 Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of Honeywell International i.e., Honeywell International and Pentair Plc go up and down completely randomly.
Pair Corralation between Honeywell International and Pentair Plc
Assuming the 90 days horizon Honeywell International is expected to generate 1.44 times more return on investment than Pentair Plc. However, Honeywell International is 1.44 times more volatile than Pentair plc. It trades about 0.31 of its potential returns per unit of risk. Pentair plc is currently generating about 0.42 per unit of risk. If you would invest 18,915 in Honeywell International on August 31, 2024 and sell it today you would earn a total of 2,760 from holding Honeywell International or generate 14.59% 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. Pentair plc
Performance |
| Timeline |
| Honeywell International |
| Pentair plc |
Honeywell International and Pentair Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Pentair Plc
The main advantage of trading using opposite Honeywell International and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Pentair Plc 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 Pentair Plc will offset losses from the drop in Pentair Plc's long position.| Honeywell International vs. Tencent Music Entertainment | Honeywell International vs. NorAm Drilling AS | Honeywell International vs. Performance Food Group | Honeywell International vs. AUSTEVOLL SEAFOOD |
| Pentair Plc vs. COMMERCIAL VEHICLE | Pentair Plc vs. SEKISUI CHEMICAL | Pentair Plc vs. KINGBOARD CHEMICAL | Pentair Plc vs. Mitsubishi Gas Chemical |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |