Correlation Between Metro Pacific and Honeywell International

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

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

Diversification Opportunities for Metro Pacific and Honeywell International

0.67

Correlation Coefficient

Metro Pacific  Honeywell International

Poor diversification

The 3 months correlation between Metro and Honeywell is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Metro Pacific Investments and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Metro Pacific 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 Metro Pacific Investments are associated (or correlated) with Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Metro Pacific i.e., Metro Pacific and Honeywell International go up and down completely randomly.

Pair Corralation between Metro Pacific and Honeywell International

If you would invest  20,453  in Honeywell International on September 4, 2024 and sell it today you would earn a total of  2,542  from holding Honeywell International or generate 12.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Metro Pacific Investments  vs.  Honeywell International

Metro Pacific Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Pacific Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Metro Pacific is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Honeywell International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 11 (%) 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 January 2025.

Pair Trading with Metro Pacific and Honeywell International

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

The idea behind Metro Pacific Investments and Honeywell International 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.