Correlation Between United Parcel and Honeywell International
Can any of the company-specific risk be diversified away by investing in both United Parcel 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 United Parcel and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parcel Service and Honeywell International, you can compare the effects of market volatilities on United Parcel 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 United Parcel with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Honeywell International.
Diversification Opportunities for United Parcel and Honeywell International
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Honeywell is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and Honeywell International go up and down completely randomly.
Pair Corralation between United Parcel and Honeywell International
Considering the 90-day investment horizon United Parcel Service is expected to under-perform the Honeywell International. In addition to that, United Parcel is 3.08 times more volatile than Honeywell International. It trades about -0.1 of its total potential returns per unit of risk. Honeywell International is currently generating about -0.03 per unit of volatility. If you would invest 22,552 in Honeywell International on November 3, 2024 and sell it today you would lose (180.00) from holding Honeywell International or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
United Parcel Service vs. Honeywell International
Performance |
| Timeline |
| United Parcel Service |
| Honeywell International |
United Parcel and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Parcel and Honeywell International
The main advantage of trading using opposite United Parcel and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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.| United Parcel vs. GXO Logistics | United Parcel vs. JB Hunt Transport | United Parcel vs. Expeditors International of | United Parcel vs. CH Robinson Worldwide |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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