Correlation Between Vardhman Holdings and Honeywell Automation

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

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

Diversification Opportunities for Vardhman Holdings and Honeywell Automation

-0.71

Correlation Coefficient

Vardhman Holdings  Honeywell Automation

Pay attention - limited upside

The 3 months correlation between Vardhman and Honeywell is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vardhman Holdings Limited and Honeywell Automation India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell Automation and Vardhman Holdings 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 Vardhman Holdings Limited are associated (or correlated) with Honeywell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell Automation has no effect on the direction of Vardhman Holdings i.e., Vardhman Holdings and Honeywell Automation go up and down completely randomly.

Pair Corralation between Vardhman Holdings and Honeywell Automation

Assuming the 90 days trading horizon Vardhman Holdings Limited is expected to generate 3.11 times more return on investment than Honeywell Automation. However, Vardhman Holdings is 3.11 times more volatile than Honeywell Automation India. It trades about 0.08 of its potential returns per unit of risk. Honeywell Automation India is currently generating about -0.2 per unit of risk. If you would invest  406,248  in Vardhman Holdings Limited on August 31, 2024 and sell it today you would earn a total of  77,372  from holding Vardhman Holdings Limited or generate 19.05% return on investment over 90 days.

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

Vardhman Holdings Limited  vs.  Honeywell Automation India

Vardhman Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vardhman Holdings Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Vardhman Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vardhman Holdings and Honeywell Automation

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

The idea behind Vardhman Holdings Limited and Honeywell Automation India 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.