Correlation Between Compass Diversified and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Compass Diversified 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 Compass Diversified and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Diversified Holdings and Honeywell International, you can compare the effects of market volatilities on Compass Diversified 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 Compass Diversified with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Honeywell International.
Diversification Opportunities for Compass Diversified and Honeywell International
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compass and Honeywell is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Compass Diversified 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 Compass Diversified Holdings 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 Compass Diversified i.e., Compass Diversified and Honeywell International go up and down completely randomly.
Pair Corralation between Compass Diversified and Honeywell International
Given the investment horizon of 90 days Compass Diversified Holdings is expected to under-perform the Honeywell International. In addition to that, Compass Diversified is 1.17 times more volatile than Honeywell International. It trades about -0.21 of its total potential returns per unit of risk. Honeywell International is currently generating about -0.02 per unit of volatility. If you would invest 22,552 in Honeywell International on November 2, 2024 and sell it today you would lose (146.00) from holding Honeywell International or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Diversified Holdings vs. Honeywell International
Performance |
| Timeline |
| Compass Diversified |
| Honeywell International |
Compass Diversified and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Diversified and Honeywell International
The main advantage of trading using opposite Compass Diversified and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified 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.| Compass Diversified vs. Matthews International | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Valmont Industries | Compass Diversified vs. Brookfield Business Partners |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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