Correlation Between Illinois Tool and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Illinois Tool 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 Illinois Tool and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Illinois Tool Works and Honeywell International, you can compare the effects of market volatilities on Illinois Tool 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 Illinois Tool with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Honeywell International.
Diversification Opportunities for Illinois Tool and Honeywell International
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Illinois and Honeywell is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Illinois Tool 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 Illinois Tool Works 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 Illinois Tool i.e., Illinois Tool and Honeywell International go up and down completely randomly.
Pair Corralation between Illinois Tool and Honeywell International
Assuming the 90 days horizon Illinois Tool Works is expected to generate 0.62 times more return on investment than Honeywell International. However, Illinois Tool Works is 1.63 times less risky than Honeywell International. It trades about 0.14 of its potential returns per unit of risk. Honeywell International is currently generating about -0.09 per unit of risk. If you would invest 24,420 in Illinois Tool Works on November 1, 2024 and sell it today you would earn a total of 740.00 from holding Illinois Tool Works or generate 3.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Illinois Tool Works vs. Honeywell International
Performance |
| Timeline |
| Illinois Tool Works |
| Honeywell International |
Illinois Tool and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Honeywell International
The main advantage of trading using opposite Illinois Tool and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool 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.| Illinois Tool vs. Monster Beverage Corp | Illinois Tool vs. Hyatt Hotels | Illinois Tool vs. Xenia Hotels Resorts | Illinois Tool vs. Molson Coors Beverage |
| Honeywell International vs. Strategic Education | Honeywell International vs. CARSALESCOM | Honeywell International vs. CarsalesCom | Honeywell International vs. MARKET VECTR RETAIL |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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