Correlation Between Honeywell Automation and Ami Organics

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

By analyzing existing cross correlation between Honeywell Automation India and Ami Organics Limited, you can compare the effects of market volatilities on Honeywell Automation and Ami Organics 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 Automation with a short position of Ami Organics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell Automation and Ami Organics.

Diversification Opportunities for Honeywell Automation and Ami Organics

-0.95

Correlation Coefficient

Honeywell Automation  Ami Organics

Pay attention - limited upside

The 3 months correlation between Honeywell and Ami is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell Automation India and Ami Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ami Organics Limited and Honeywell Automation 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 Automation India are associated (or correlated) with Ami Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ami Organics Limited has no effect on the direction of Honeywell Automation i.e., Honeywell Automation and Ami Organics go up and down completely randomly.

Pair Corralation between Honeywell Automation and Ami Organics

Assuming the 90 days trading horizon Honeywell Automation India is expected to under-perform the Ami Organics. But the stock apears to be less risky and, when comparing its historical volatility, Honeywell Automation India is 2.13 times less risky than Ami Organics. The stock trades about -0.19 of its potential returns per unit of risk. The Ami Organics Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  150,920  in Ami Organics Limited on September 13, 2024 and sell it today you would earn a total of  70,810  from holding Ami Organics Limited or generate 46.92% return on investment over 90 days.

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

Honeywell Automation India  vs.  Ami Organics Limited

Honeywell Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Honeywell Automation India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ami Organics Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ami Organics Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ami Organics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honeywell Automation and Ami Organics

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

The idea behind Honeywell Automation India and Ami Organics Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.