Correlation Between Honeywell International and CK Hutchison

Can any of the company-specific risk be diversified away by investing in both Honeywell International and CK Hutchison 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 Honeywell International and CK Hutchison into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Honeywell International and CK Hutchison Holdings, you can compare the effects of market volatilities on Honeywell International and CK Hutchison 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 Honeywell International with a short position of CK Hutchison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and CK Hutchison.

Diversification Opportunities for Honeywell International and CK Hutchison

-0.26

Correlation Coefficient

Honeywell International  CK Hutchison

Very good diversification

The 3 months correlation between Honeywell and 2CK is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and CK Hutchison Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CK Hutchison Holdings and Honeywell International 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 Honeywell International are associated (or correlated) with CK Hutchison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CK Hutchison Holdings has no effect on the direction of Honeywell International i.e., Honeywell International and CK Hutchison go up and down completely randomly.

Pair Corralation between Honeywell International and CK Hutchison

Assuming the 90 days trading horizon Honeywell International is expected to generate 0.94 times more return on investment than CK Hutchison. However, Honeywell International is 1.06 times less risky than CK Hutchison. It trades about 0.21 of its potential returns per unit of risk. CK Hutchison Holdings is currently generating about 0.01 per unit of risk. If you would invest  18,220  in Honeywell International on September 23, 2024 and sell it today you would earn a total of  3,725  from holding Honeywell International or generate 20.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Honeywell International  vs.  CK Hutchison Holdings

Honeywell International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Honeywell International unveiled solid returns over the last few months and may actually be approaching a breakup point.

CK Hutchison Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK Hutchison Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CK Hutchison is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Honeywell International and CK Hutchison

The main advantage of trading using opposite Honeywell International and CK Hutchison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, CK Hutchison 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 CK Hutchison will offset losses from the drop in CK Hutchison's long position.

The idea behind Honeywell International and CK Hutchison Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.