Correlation Between Honeywell International and Amazon
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Amazon Inc, you can compare the effects of market volatilities on Honeywell International and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Amazon.
Diversification Opportunities for Honeywell International and Amazon
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Honeywell and Amazon is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Honeywell International i.e., Honeywell International and Amazon go up and down completely randomly.
Pair Corralation between Honeywell International and Amazon
Assuming the 90 days trading horizon Honeywell International is expected to generate 5.16 times less return on investment than Amazon. But when comparing it to its historical volatility, Honeywell International is 1.32 times less risky than Amazon. It trades about 0.03 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 163,430 in Amazon Inc on September 20, 2024 and sell it today you would earn a total of 287,656 from holding Amazon Inc or generate 176.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honeywell International vs. Amazon Inc
Performance |
| Timeline |
| Honeywell International |
| Amazon Inc |
Honeywell International and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Amazon
The main advantage of trading using opposite Honeywell International and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Honeywell International vs. 3M Company | Honeywell International vs. Emerson Electric Co | Honeywell International vs. The Select Sector | Honeywell International vs. Promotora y Operadora |
| Amazon vs. Honeywell International | Amazon vs. Southern Copper | Amazon vs. Grupo KUO SAB | Amazon vs. The Goodyear Tire |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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