Correlation Between Crane and Honeywell International

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

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

Diversification Opportunities for Crane and Honeywell International

-0.17

Correlation Coefficient

Crane  Honeywell International

Good diversification

The 3 months correlation between Crane and Honeywell is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Crane 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 Crane Company 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 Crane i.e., Crane and Honeywell International go up and down completely randomly.

Pair Corralation between Crane and Honeywell International

Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.76 times more return on investment than Honeywell International. However, Crane is 1.76 times more volatile than Honeywell International. It trades about 0.16 of its potential returns per unit of risk. Honeywell International is currently generating about -0.14 per unit of risk. If you would invest  13,390  in Crane Company on January 26, 2024 and sell it today you would earn a total of  823.00  from holding Crane Company or generate 6.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Crane Company  vs.  Honeywell International

Crane Company

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Crane reported solid returns over the last few months and may actually be approaching a breakup point.

Honeywell International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Honeywell International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Honeywell International is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Crane and Honeywell International

The main advantage of trading using opposite Crane and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane 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 Crane Company 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.