Correlation Between SIL Investments and Honeywell Automation

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Can any of the company-specific risk be diversified away by investing in both SIL Investments and Honeywell Automation 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 SIL Investments and Honeywell Automation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SIL Investments Limited and Honeywell Automation India, you can compare the effects of market volatilities on SIL Investments and Honeywell Automation 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 SIL Investments with a short position of Honeywell Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIL Investments and Honeywell Automation.

Diversification Opportunities for SIL Investments and Honeywell Automation

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between SIL and Honeywell is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SIL Investments Limited and Honeywell Automation India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell Automation and SIL Investments 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 SIL Investments Limited are associated (or correlated) with Honeywell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell Automation has no effect on the direction of SIL Investments i.e., SIL Investments and Honeywell Automation go up and down completely randomly.

Pair Corralation between SIL Investments and Honeywell Automation

Assuming the 90 days trading horizon SIL Investments Limited is expected to generate 2.28 times more return on investment than Honeywell Automation. However, SIL Investments is 2.28 times more volatile than Honeywell Automation India. It trades about 0.12 of its potential returns per unit of risk. Honeywell Automation India is currently generating about -0.09 per unit of risk. If you would invest  43,385  in SIL Investments Limited on September 2, 2024 and sell it today you would earn a total of  25,080  from holding SIL Investments Limited or generate 57.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

SIL Investments Limited  vs.  Honeywell Automation India

 Performance 
       Timeline  
SIL Investments 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in SIL Investments Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward indicators, SIL Investments sustained solid returns over the last few months and may actually be approaching a breakup point.
Honeywell Automation 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Honeywell Automation India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SIL Investments and Honeywell Automation Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SIL Investments and Honeywell Automation

The main advantage of trading using opposite SIL Investments and Honeywell Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIL Investments position performs unexpectedly, Honeywell Automation 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 Automation will offset losses from the drop in Honeywell Automation's long position.
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The idea behind SIL Investments Limited and Honeywell Automation India pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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