Correlation Between Bank of America and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Bank of America and Honeywell International 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 Bank of America and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Honeywell International, you can compare the effects of market volatilities on Bank of America and Honeywell International 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 Bank of America with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Honeywell International.
Diversification Opportunities for Bank of America and Honeywell International
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Honeywell is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Bank of America 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 Bank of America are associated (or correlated) with Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Bank of America i.e., Bank of America and Honeywell International go up and down completely randomly.
Pair Corralation between Bank of America and Honeywell International
Considering the 90-day investment horizon Bank of America is expected to generate 3.02 times less return on investment than Honeywell International. But when comparing it to its historical volatility, Bank of America is 1.31 times less risky than Honeywell International. It trades about 0.04 of its potential returns per unit of risk. Honeywell International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 430,915 in Honeywell International on November 6, 2024 and sell it today you would earn a total of 36,585 from holding Honeywell International or generate 8.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Bank of America vs. Honeywell International
Performance |
| Timeline |
| Bank of America |
| Honeywell International |
Bank of America and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Honeywell International
The main advantage of trading using opposite Bank of America and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Honeywell International 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 Honeywell International will offset losses from the drop in Honeywell International's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Royal Bank of | Bank of America vs. Canadian Imperial Bank |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |