Correlation Between Honeywell Automation and Electronics Mart

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Can any of the company-specific risk be diversified away by investing in both Honeywell Automation and Electronics Mart 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 Automation and Electronics Mart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell Automation India and Electronics Mart India, you can compare the effects of market volatilities on Honeywell Automation and Electronics Mart 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 Automation with a short position of Electronics Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell Automation and Electronics Mart.

Diversification Opportunities for Honeywell Automation and Electronics Mart

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Honeywell and Electronics is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Electronics Mart India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronics Mart India and Honeywell Automation 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 Automation India are associated (or correlated) with Electronics Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronics Mart India has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Electronics Mart go up and down completely randomly.

Pair Corralation between Honeywell Automation and Electronics Mart

Assuming the 90 days trading horizon Honeywell Automation India is expected to under-perform the Electronics Mart. But the stock apears to be less risky and, when comparing its historical volatility, Honeywell Automation India is 3.51 times less risky than Electronics Mart. The stock trades about -0.41 of its potential returns per unit of risk. The Electronics Mart India is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  18,591  in Electronics Mart India on August 31, 2024 and sell it today you would lose (708.00) from holding Electronics Mart India or give up 3.81% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Honeywell Automation India  vs.  Electronics Mart India

 Performance 
       Timeline  
Honeywell Automation 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Honeywell Automation India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Electronics Mart India 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Electronics Mart India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Honeywell Automation and Electronics Mart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Honeywell Automation and Electronics Mart

The main advantage of trading using opposite Honeywell Automation and Electronics Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell Automation position performs unexpectedly, Electronics Mart 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 Electronics Mart will offset losses from the drop in Electronics Mart's long position.
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The idea behind Honeywell Automation India and Electronics Mart India 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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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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