Correlation Between Honeywell International and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Honeywell International and US Bancorp 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 US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and US Bancorp, you can compare the effects of market volatilities on Honeywell International and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and US Bancorp.
Diversification Opportunities for Honeywell International and US Bancorp
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Honeywell and USB is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Honeywell International i.e., Honeywell International and US Bancorp go up and down completely randomly.
Pair Corralation between Honeywell International and US Bancorp
Assuming the 90 days trading horizon Honeywell International is expected to generate 1.42 times more return on investment than US Bancorp. However, Honeywell International is 1.42 times more volatile than US Bancorp. It trades about 0.11 of its potential returns per unit of risk. US Bancorp is currently generating about 0.13 per unit of risk. If you would invest 437,882 in Honeywell International on September 19, 2024 and sell it today you would earn a total of 30,718 from holding Honeywell International or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.56% |
| Values | Daily Returns |
Honeywell International vs. US Bancorp
Performance |
| Timeline |
| Honeywell International |
| US Bancorp |
Honeywell International and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and US Bancorp
The main advantage of trading using opposite Honeywell International and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp'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 |
| US Bancorp vs. Netflix | US Bancorp vs. Honeywell International | US Bancorp vs. The Goodyear Tire | US Bancorp vs. The Walt Disney |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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