Correlation Between Honeywell International and Aker ASA

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

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

Diversification Opportunities for Honeywell International and Aker ASA

-0.58

Correlation Coefficient

Honeywell International  Aker ASA

Excellent diversification

The 3 months correlation between Honeywell and Aker is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Aker ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker ASA 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 Aker ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker ASA has no effect on the direction of Honeywell International i.e., Honeywell International and Aker ASA go up and down completely randomly.

Pair Corralation between Honeywell International and Aker ASA

Considering the 90-day investment horizon Honeywell International is expected to generate 4.11 times more return on investment than Aker ASA. However, Honeywell International is 4.11 times more volatile than Aker ASA. It trades about 0.17 of its potential returns per unit of risk. Aker ASA is currently generating about -0.13 per unit of risk. If you would invest  20,386  in Honeywell International on September 1, 2024 and sell it today you would earn a total of  2,907  from holding Honeywell International or generate 14.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Honeywell International  vs.  Aker ASA

Honeywell International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Honeywell International displayed solid returns over the last few months and may actually be approaching a breakup point.

Aker ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aker ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aker ASA 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 Aker ASA

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

The idea behind Honeywell International and Aker ASA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.