Correlation Between Honeywell International and Marubeni Corp
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Marubeni Corp 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 Marubeni Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Marubeni Corp ADR, you can compare the effects of market volatilities on Honeywell International and Marubeni Corp 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 Marubeni Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Marubeni Corp.
Diversification Opportunities for Honeywell International and Marubeni Corp
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Honeywell and Marubeni is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Marubeni Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni Corp ADR 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 Marubeni Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni Corp ADR has no effect on the direction of Honeywell International i.e., Honeywell International and Marubeni Corp go up and down completely randomly.
Pair Corralation between Honeywell International and Marubeni Corp
Considering the 90-day investment horizon Honeywell International is expected to generate 0.84 times more return on investment than Marubeni Corp. However, Honeywell International is 1.19 times less risky than Marubeni Corp. It trades about 0.4 of its potential returns per unit of risk. Marubeni Corp ADR is currently generating about 0.03 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 | 100.0% |
| Values | Daily Returns |
Honeywell International vs. Marubeni Corp ADR
Performance |
| Timeline |
| Honeywell International |
| Marubeni Corp ADR |
Honeywell International and Marubeni Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Marubeni Corp
The main advantage of trading using opposite Honeywell International and Marubeni Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Marubeni Corp 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 Marubeni Corp will offset losses from the drop in Marubeni Corp's long position.The idea behind Honeywell International and Marubeni Corp ADR 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.
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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