Correlation Between World Oil and Honeywell International
Can any of the company-specific risk be diversified away by investing in both World Oil 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 World Oil and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Oil Group and Honeywell International, you can compare the effects of market volatilities on World Oil 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 World Oil with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Oil and Honeywell International.
Diversification Opportunities for World Oil and Honeywell International
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between World and Honeywell is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding World Oil Group and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and World Oil 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 World Oil Group 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 World Oil i.e., World Oil and Honeywell International go up and down completely randomly.
Pair Corralation between World Oil and Honeywell International
Given the investment horizon of 90 days World Oil Group is expected to under-perform the Honeywell International. In addition to that, World Oil is 6.41 times more volatile than Honeywell International. It trades about -0.03 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.19 per unit of volatility. If you would invest 20,570 in Honeywell International on August 29, 2024 and sell it today you would earn a total of 2,476 from holding Honeywell International or generate 12.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Oil Group vs. Honeywell International
Performance |
| Timeline |
| World Oil Group |
| Honeywell International |
World Oil and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Oil and Honeywell International
The main advantage of trading using opposite World Oil and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Oil 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.| World Oil vs. Honeywell International | World Oil vs. 3M Company | World Oil vs. Mitsubishi Corp | World Oil vs. Hitachi |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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