Correlation Between Honeywell International and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Emerson Electric 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 Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Emerson Electric Co, you can compare the effects of market volatilities on Honeywell International and Emerson Electric 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 Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Emerson Electric.
Diversification Opportunities for Honeywell International and Emerson Electric
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Honeywell and Emerson is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Emerson Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric 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 Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Honeywell International i.e., Honeywell International and Emerson Electric go up and down completely randomly.
Pair Corralation between Honeywell International and Emerson Electric
Assuming the 90 days trading horizon Honeywell International is expected to generate 2013.86 times less return on investment than Emerson Electric. But when comparing it to its historical volatility, Honeywell International is 3.76 times less risky than Emerson Electric. It trades about 0.0 of its potential returns per unit of risk. Emerson Electric Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 204,200 in Emerson Electric Co on November 7, 2024 and sell it today you would earn a total of 60,451 from holding Emerson Electric Co or generate 29.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Honeywell International vs. Emerson Electric Co
Performance |
| Timeline |
| Honeywell International |
| Emerson Electric |
Honeywell International and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Emerson Electric
The main advantage of trading using opposite Honeywell International and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Emerson Electric 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 Emerson Electric will offset losses from the drop in Emerson Electric's long position.| Honeywell International vs. Grupo Carso SAB | Honeywell International vs. Genworth Financial | Honeywell International vs. Prudential Financial | Honeywell International vs. Southwest Airlines |
| Emerson Electric vs. Grupo Industrial Saltillo | Emerson Electric vs. Steel Dynamics | Emerson Electric vs. Micron Technology | Emerson Electric vs. Cognizant Technology Solutions |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |