Correlation Between Honeywell International and Fibra Plus

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

By analyzing existing cross correlation between Honeywell International and Fibra Plus, you can compare the effects of market volatilities on Honeywell International and Fibra Plus 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 Fibra Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Fibra Plus.

Diversification Opportunities for Honeywell International and Fibra Plus

-0.73

Correlation Coefficient

Honeywell International  Fibra Plus

Pay attention - limited upside

The 3 months correlation between Honeywell and Fibra is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Fibra Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra Plus 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 Fibra Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra Plus has no effect on the direction of Honeywell International i.e., Honeywell International and Fibra Plus go up and down completely randomly.

Pair Corralation between Honeywell International and Fibra Plus

Assuming the 90 days trading horizon Honeywell International is expected to generate 0.49 times more return on investment than Fibra Plus. However, Honeywell International is 2.06 times less risky than Fibra Plus. It trades about 0.13 of its potential returns per unit of risk. Fibra Plus is currently generating about -0.02 per unit of risk. If you would invest  409,817  in Honeywell International on September 27, 2024 and sell it today you would earn a total of  50,183  from holding Honeywell International or generate 12.25% return on investment over 90 days.

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

Honeywell International  vs.  Fibra Plus

Honeywell International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Honeywell International showed solid returns over the last few months and may actually be approaching a breakup point.

Fibra Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fibra Plus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fibra Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Honeywell International and Fibra Plus

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

The idea behind Honeywell International and Fibra Plus 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.