Correlation Between Sumitomo Mitsui and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui 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 Sumitomo Mitsui and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Financial and Honeywell International, you can compare the effects of market volatilities on Sumitomo Mitsui 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 Sumitomo Mitsui with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Honeywell International.
Diversification Opportunities for Sumitomo Mitsui and Honeywell International
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sumitomo and Honeywell is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Sumitomo Mitsui 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 Sumitomo Mitsui Financial 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 Sumitomo Mitsui i.e., Sumitomo Mitsui and Honeywell International go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Honeywell International
Assuming the 90 days trading horizon Sumitomo Mitsui is expected to generate 1.15 times less return on investment than Honeywell International. But when comparing it to its historical volatility, Sumitomo Mitsui Financial is 1.24 times less risky than Honeywell International. It trades about 0.38 of its potential returns per unit of risk. Honeywell International is currently generating about 0.35 of returns per unit of risk over similar time horizon. 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 | Very Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Honeywell International
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Honeywell International |
Sumitomo Mitsui and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Honeywell International
The main advantage of trading using opposite Sumitomo Mitsui and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui 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.| Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. Fras le SA | Sumitomo Mitsui vs. Western Digital | Sumitomo Mitsui vs. Energisa SA |
| Honeywell International vs. Micron Technology | Honeywell International vs. Spotify Technology SA | Honeywell International vs. Monster Beverage | Honeywell International vs. Charter 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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