Correlation Between Honeywell International and Trade Desk
Can any of the company-specific risk be diversified away by investing in both Honeywell International and Trade Desk 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 Trade Desk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and The Trade Desk, you can compare the effects of market volatilities on Honeywell International and Trade Desk 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 Trade Desk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Trade Desk.
Diversification Opportunities for Honeywell International and Trade Desk
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Honeywell and Trade is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and The Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk 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 Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Honeywell International i.e., Honeywell International and Trade Desk go up and down completely randomly.
Pair Corralation between Honeywell International and Trade Desk
Assuming the 90 days trading horizon Honeywell International is expected to generate 0.72 times more return on investment than Trade Desk. However, Honeywell International is 1.4 times less risky than Trade Desk. It trades about 0.35 of its potential returns per unit of risk. The Trade Desk is currently generating about 0.18 per unit of risk. If you would invest 119,249 in Honeywell International on September 1, 2024 and sell it today you would earn a total of 20,237 from holding Honeywell International or generate 16.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Honeywell International vs. The Trade Desk
Performance |
| Timeline |
| Honeywell International |
| Trade Desk |
Honeywell International and Trade Desk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Trade Desk
The main advantage of trading using opposite Honeywell International and Trade Desk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Trade Desk 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 Trade Desk will offset losses from the drop in Trade Desk's long position.| Honeywell International vs. Micron Technology | Honeywell International vs. Spotify Technology SA | Honeywell International vs. Monster Beverage | Honeywell International vs. Charter Communications |
| Trade Desk vs. Micron Technology | Trade Desk vs. Tyson Foods | Trade Desk vs. Cognizant Technology Solutions | Trade Desk vs. Zoom Video Communications |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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