Correlation Between Big 5 and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Honeywell International, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Honeywell International.
Diversification Opportunities for Big 5 and Honeywell International
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Big and Honeywell is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and Honeywell International go up and down completely randomly.
Pair Corralation between Big 5 and Honeywell International
Assuming the 90 days horizon Big 5 is expected to generate 1.19 times less return on investment than Honeywell International. In addition to that, Big 5 is 2.46 times more volatile than Honeywell International. It trades about 0.16 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.46 per unit of volatility. If you would invest 18,751 in Honeywell International on September 1, 2024 and sell it today you would earn a total of 3,219 from holding Honeywell International or generate 17.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Big 5 Sporting vs. Honeywell International
Performance |
| Timeline |
| Big 5 Sporting |
| Honeywell International |
Big 5 and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Honeywell International
The main advantage of trading using opposite Big 5 and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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.The idea behind Big 5 Sporting and Honeywell International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Honeywell International vs. Ming Le Sports | Honeywell International vs. Fukuyama Transporting Co | Honeywell International vs. Big 5 Sporting | Honeywell International vs. COLUMBIA SPORTSWEAR |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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