Correlation Between Seaboard and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Seaboard 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 Seaboard and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seaboard and Honeywell International, you can compare the effects of market volatilities on Seaboard 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 Seaboard with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seaboard and Honeywell International.
Diversification Opportunities for Seaboard and Honeywell International
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Seaboard and Honeywell is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Seaboard and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Seaboard 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 Seaboard 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 Seaboard i.e., Seaboard and Honeywell International go up and down completely randomly.
Pair Corralation between Seaboard and Honeywell International
Considering the 90-day investment horizon Seaboard is expected to under-perform the Honeywell International. But the stock apears to be less risky and, when comparing its historical volatility, Seaboard is 1.22 times less risky than Honeywell International. The stock trades about -0.32 of its potential returns per unit of risk. The Honeywell International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 21,926 in Honeywell International on August 24, 2024 and sell it today you would earn a total of 683.00 from holding Honeywell International or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seaboard vs. Honeywell International
Performance |
| Timeline |
| Seaboard |
| Honeywell International |
Seaboard and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seaboard and Honeywell International
The main advantage of trading using opposite Seaboard and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seaboard 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.| Seaboard vs. White Mountains Insurance | Seaboard vs. Cable One | Seaboard vs. NVR Inc | Seaboard vs. Alexanders |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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