Correlation Between Hillenbrand and Honeywell International

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

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

Diversification Opportunities for Hillenbrand and Honeywell International

0.33

Correlation Coefficient

Hillenbrand  Honeywell International

Weak diversification

The 3 months correlation between Hillenbrand and Honeywell is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Hillenbrand 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 Hillenbrand 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 Hillenbrand i.e., Hillenbrand and Honeywell International go up and down completely randomly.

Pair Corralation between Hillenbrand and Honeywell International

Allowing for the 90-day total investment horizon Hillenbrand is expected to generate 1.9 times more return on investment than Honeywell International. However, Hillenbrand is 1.9 times more volatile than Honeywell International. It trades about 0.13 of its potential returns per unit of risk. Honeywell International is currently generating about 0.09 per unit of risk. If you would invest  3,713  in Hillenbrand on January 25, 2024 and sell it today you would earn a total of  1,205  from holding Hillenbrand or generate 32.45% return on investment over 90 days.

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

Hillenbrand  vs.  Honeywell International

Hillenbrand

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hillenbrand are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Hillenbrand may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 Hillenbrand and Honeywell International

The main advantage of trading using opposite Hillenbrand and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hillenbrand 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 Hillenbrand 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..