Correlation Between Honeywell International and General Electric
Can any of the company-specific risk be diversified away by investing in both Honeywell International and General 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 General 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 General Electric, you can compare the effects of market volatilities on Honeywell International and General 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 General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and General Electric.
Diversification Opportunities for Honeywell International and General Electric
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Honeywell and General is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Honeywell International i.e., Honeywell International and General Electric go up and down completely randomly.
Pair Corralation between Honeywell International and General Electric
Assuming the 90 days trading horizon Honeywell International is expected to generate 2.64 times less return on investment than General Electric. But when comparing it to its historical volatility, Honeywell International is 1.53 times less risky than General Electric. It trades about 0.04 of its potential returns per unit of risk. General Electric is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 44,845 in General Electric on September 14, 2024 and sell it today you would earn a total of 53,855 from holding General Electric or generate 120.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 76.31% |
| Values | Daily Returns |
Honeywell International vs. General Electric
Performance |
| Timeline |
| Honeywell International |
| General Electric |
Honeywell International and General Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and General Electric
The main advantage of trading using opposite Honeywell International and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, General 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 General Electric will offset losses from the drop in General Electric's long position.| Honeywell International vs. General Electric | Honeywell International vs. Eaton plc | Honeywell International vs. Otis Worldwide | Honeywell International vs. Aeris Indstria e |
| General Electric vs. Monster Beverage | General Electric vs. Southwest Airlines Co | General Electric vs. Iron Mountain Incorporated | General Electric vs. The Trade Desk |
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.
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