Correlation Between Honeywell International and Sumitomo
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Sumitomo 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 Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Sumitomo, you can compare the effects of market volatilities on Honeywell International and Sumitomo 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 Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Sumitomo.
Diversification Opportunities for Honeywell International and Sumitomo
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Honeywell and Sumitomo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo 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 Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of Honeywell International i.e., Honeywell International and Sumitomo go up and down completely randomly.
Pair Corralation between Honeywell International and Sumitomo
Assuming the 90 days trading horizon Honeywell International is expected to generate 0.59 times more return on investment than Sumitomo. However, Honeywell International is 1.68 times less risky than Sumitomo. It trades about 0.41 of its potential returns per unit of risk. Sumitomo is currently generating about 0.04 per unit of risk. If you would invest 19,056 in Honeywell International on August 29, 2024 and sell it today you would earn a total of 2,909 from holding Honeywell International or generate 15.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honeywell International vs. Sumitomo
Performance |
| Timeline |
| Honeywell International |
| Sumitomo |
Honeywell International and Sumitomo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Sumitomo
The main advantage of trading using opposite Honeywell International and Sumitomo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Sumitomo 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 Sumitomo will offset losses from the drop in Sumitomo's long position.| Honeywell International vs. BioNTech SE | Honeywell International vs. Sunny Optical Technology | Honeywell International vs. Playtech plc | Honeywell International vs. NetSol Technologies |
| Sumitomo vs. CeoTronics AG | Sumitomo vs. United Insurance Holdings | Sumitomo vs. CODERE ONLINE LUX | Sumitomo vs. CARSALESCOM |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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