Correlation Between Honeywell International and Miller Industries

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

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

Diversification Opportunities for Honeywell International and Miller Industries

0.72

Correlation Coefficient

Honeywell International  Miller Industries

Poor diversification

The 3 months correlation between Honeywell and Miller is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Miller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Industries 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 Miller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Industries has no effect on the direction of Honeywell International i.e., Honeywell International and Miller Industries go up and down completely randomly.

Pair Corralation between Honeywell International and Miller Industries

Considering the 90-day investment horizon Honeywell International is expected to generate 2.11 times less return on investment than Miller Industries. But when comparing it to its historical volatility, Honeywell International is 1.92 times less risky than Miller Industries. It trades about 0.13 of its potential returns per unit of risk. Miller Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,051  in Miller Industries on August 30, 2024 and sell it today you would earn a total of  1,421  from holding Miller Industries or generate 23.48% return on investment over 90 days.

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

Honeywell International  vs.  Miller Industries

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 very uncertain basic indicators, Honeywell International may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Miller Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating essential indicators, Miller Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honeywell International and Miller Industries

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

The idea behind Honeywell International and Miller Industries 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.