Correlation Between Select Sector and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Select Sector 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 Select Sector and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and Honeywell International, you can compare the effects of market volatilities on Select Sector 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 Select Sector with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and Honeywell International.
Diversification Opportunities for Select Sector and Honeywell International
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Select and Honeywell is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Select Sector 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 The Select Sector 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 Select Sector i.e., Select Sector and Honeywell International go up and down completely randomly.
Pair Corralation between Select Sector and Honeywell International
Assuming the 90 days trading horizon The Select Sector is expected to under-perform the Honeywell International. In addition to that, Select Sector is 1.57 times more volatile than Honeywell International. It trades about -0.12 of its total potential returns per unit of risk. Honeywell International is currently generating about 0.07 per unit of volatility. If you would invest 462,826 in Honeywell International on September 20, 2024 and sell it today you would earn a total of 5,774 from holding Honeywell International or generate 1.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Select Sector vs. Honeywell International
Performance |
| Timeline |
| Select Sector |
| Honeywell International |
Select Sector and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and Honeywell International
The main advantage of trading using opposite Select Sector and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector 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.| Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Index Funds | Select Sector vs. SPDR SP 500 | Select Sector vs. Vanguard Bond Index |
| Honeywell International vs. 3M Company | Honeywell International vs. Emerson Electric Co | Honeywell International vs. The Select Sector | Honeywell International vs. Promotora y Operadora |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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