Correlation Between Honeywell International and Alliance Global
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Alliance Global 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 Alliance Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Alliance Global Group, you can compare the effects of market volatilities on Honeywell International and Alliance Global 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 Alliance Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Alliance Global.
Diversification Opportunities for Honeywell International and Alliance Global
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Honeywell and Alliance is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Alliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Global Group 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 Alliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Global Group has no effect on the direction of Honeywell International i.e., Honeywell International and Alliance Global go up and down completely randomly.
Pair Corralation between Honeywell International and Alliance Global
Considering the 90-day investment horizon Honeywell International is expected to generate 0.89 times more return on investment than Alliance Global. However, Honeywell International is 1.13 times less risky than Alliance Global. It trades about 0.39 of its potential returns per unit of risk. Alliance Global Group is currently generating about -0.09 per unit of risk. If you would invest 20,509 in Honeywell International on August 29, 2024 and sell it today you would earn a total of 2,531 from holding Honeywell International or generate 12.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Honeywell International vs. Alliance Global Group
Performance |
| Timeline |
| Honeywell International |
| Alliance Global Group |
Honeywell International and Alliance Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Alliance Global
The main advantage of trading using opposite Honeywell International and Alliance Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Alliance Global 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 Alliance Global will offset losses from the drop in Alliance Global's long position.The idea behind Honeywell International and Alliance Global Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Alliance Global vs. Honeywell International | Alliance Global vs. 3M Company | Alliance Global vs. Mitsubishi Corp | Alliance Global vs. Hitachi |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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