Correlation Between Titan Company and Honeywell International

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

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

Diversification Opportunities for Titan Company and Honeywell International

-0.79

Correlation Coefficient

Titan Company  Honeywell International

Pay attention - limited upside

The 3 months correlation between Titan and Honeywell is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Titan Company 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 Titan Company Limited 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 Titan Company i.e., Titan Company and Honeywell International go up and down completely randomly.

Pair Corralation between Titan Company and Honeywell International

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the Honeywell International. But the stock apears to be less risky and, when comparing its historical volatility, Titan Company Limited is 1.22 times less risky than Honeywell International. The stock trades about -0.12 of its potential returns per unit of risk. The Honeywell International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  18,481  in Honeywell International on September 3, 2024 and sell it today you would earn a total of  3,149  from holding Honeywell International or generate 17.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Titan Company Limited  vs.  Honeywell International

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Honeywell International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Honeywell International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Company and Honeywell International

The main advantage of trading using opposite Titan Company and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Company 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 Titan Company Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.