Correlation Between Hitachi and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Hitachi and Honeywell International 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 Hitachi and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hitachi and Honeywell International, you can compare the effects of market volatilities on Hitachi and Honeywell International 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 Hitachi with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi and Honeywell International.
Diversification Opportunities for Hitachi and Honeywell International
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hitachi and Honeywell is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Hitachi 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 Hitachi are associated (or correlated) with Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Hitachi i.e., Hitachi and Honeywell International go up and down completely randomly.
Pair Corralation between Hitachi and Honeywell International
Assuming the 90 days horizon Hitachi is expected to generate 3.43 times more return on investment than Honeywell International. However, Hitachi is 3.43 times more volatile than Honeywell International. It trades about 0.08 of its potential returns per unit of risk. Honeywell International is currently generating about 0.03 per unit of risk. If you would invest 1,003 in Hitachi on November 27, 2024 and sell it today you would earn a total of 1,727 from holding Hitachi or generate 172.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.31% |
| Values | Daily Returns |
Hitachi vs. Honeywell International
Performance |
| Timeline |
| Hitachi |
| Honeywell International |
Hitachi and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi and Honeywell International
The main advantage of trading using opposite Hitachi and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi position performs unexpectedly, Honeywell International 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 Honeywell International will offset losses from the drop in Honeywell International's long position.The idea behind Hitachi and Honeywell International 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.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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |