Correlation Between ETFS Coffee and Honeywell International
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee 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 ETFS Coffee and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETFS Coffee ETC and Honeywell International, you can compare the effects of market volatilities on ETFS Coffee 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 ETFS Coffee with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and Honeywell International.
Diversification Opportunities for ETFS Coffee and Honeywell International
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETFS and Honeywell is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and ETFS Coffee 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 ETFS Coffee ETC 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 ETFS Coffee i.e., ETFS Coffee and Honeywell International go up and down completely randomly.
Pair Corralation between ETFS Coffee and Honeywell International
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 1.43 times more return on investment than Honeywell International. However, ETFS Coffee is 1.43 times more volatile than Honeywell International. It trades about 0.36 of its potential returns per unit of risk. Honeywell International is currently generating about 0.25 per unit of risk. If you would invest 3,741 in ETFS Coffee ETC on September 5, 2024 and sell it today you would earn a total of 976.00 from holding ETFS Coffee ETC or generate 26.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ETFS Coffee ETC vs. Honeywell International
Performance |
| Timeline |
| ETFS Coffee ETC |
| Honeywell International |
ETFS Coffee and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and Honeywell International
The main advantage of trading using opposite ETFS Coffee and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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.| ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc |
| Honeywell International vs. EMBARK EDUCATION LTD | Honeywell International vs. ETFS Coffee ETC | Honeywell International vs. United Breweries Co | Honeywell International vs. Thai Beverage Public |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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