Correlation Between Ecare Solutions and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Ecare Solutions 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 Ecare Solutions and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecare Solutions and Honeywell International, you can compare the effects of market volatilities on Ecare Solutions 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 Ecare Solutions with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecare Solutions and Honeywell International.
Diversification Opportunities for Ecare Solutions and Honeywell International
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ecare and Honeywell is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ecare Solutions and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Ecare Solutions 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 Ecare Solutions 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 Ecare Solutions i.e., Ecare Solutions and Honeywell International go up and down completely randomly.
Pair Corralation between Ecare Solutions and Honeywell International
Given the investment horizon of 90 days Ecare Solutions is expected to generate 2.08 times more return on investment than Honeywell International. However, Ecare Solutions is 2.08 times more volatile than Honeywell International. It trades about -0.04 of its potential returns per unit of risk. Honeywell International is currently generating about -0.15 per unit of risk. If you would invest 90.00 in Ecare Solutions on January 20, 2024 and sell it today you would lose (2.00) from holding Ecare Solutions or give up 2.22% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Ecare Solutions vs. Honeywell International
Performance |
Timeline |
Ecare Solutions |
Honeywell International |
Ecare Solutions and Honeywell International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ecare Solutions and Honeywell International
The main advantage of trading using opposite Ecare Solutions and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecare Solutions 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.Ecare Solutions vs. Honeywell International | Ecare Solutions vs. MDU Resources Group | Ecare Solutions vs. Compass Diversified Holdings | Ecare Solutions vs. Valmont Industries |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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