Correlation Between Dow Jones and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Honeywell International, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Honeywell International.
Diversification Opportunities for Dow Jones and Honeywell International
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Honeywell is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Honeywell International go up and down completely randomly.
Pair Corralation between Dow Jones and Honeywell International
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.39 times more return on investment than Honeywell International. However, Dow Jones Industrial is 2.53 times less risky than Honeywell International. It trades about -0.16 of its potential returns per unit of risk. Honeywell International is currently generating about -0.07 per unit of risk. If you would invest 4,488,213 in Dow Jones Industrial on December 1, 2024 and sell it today you would lose (104,122) from holding Dow Jones Industrial or give up 2.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Honeywell International
Performance |
| Timeline |
Dow Jones and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Honeywell International
Pair trading matchups for Honeywell International
Pair Trading with Dow Jones and Honeywell International
The main advantage of trading using opposite Dow Jones and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Cannae Holdings | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. SEI Investments | Dow Jones vs. Cracker Barrel Old |
| Honeywell International vs. AGNC Investment Corp | Honeywell International vs. STORE ELECTRONIC | Honeywell International vs. ECHO INVESTMENT ZY | Honeywell International vs. HK Electric Investments |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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