Correlation Between Honeywell International and Bushveld Minerals

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Can any of the company-specific risk be diversified away by investing in both Honeywell International and Bushveld Minerals 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 Honeywell International and Bushveld Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Bushveld Minerals Limited, you can compare the effects of market volatilities on Honeywell International and Bushveld Minerals 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 Honeywell International with a short position of Bushveld Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Bushveld Minerals.

Diversification Opportunities for Honeywell International and Bushveld Minerals

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Honeywell and Bushveld is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Bushveld Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bushveld Minerals and Honeywell International 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 Honeywell International are associated (or correlated) with Bushveld Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bushveld Minerals has no effect on the direction of Honeywell International i.e., Honeywell International and Bushveld Minerals go up and down completely randomly.

Pair Corralation between Honeywell International and Bushveld Minerals

Considering the 90-day investment horizon Honeywell International is expected to generate 2.42 times less return on investment than Bushveld Minerals. But when comparing it to its historical volatility, Honeywell International is 21.51 times less risky than Bushveld Minerals. It trades about 0.19 of its potential returns per unit of risk. Bushveld Minerals Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.10  in Bushveld Minerals Limited on December 29, 2023 and sell it today you would lose (0.80) from holding Bushveld Minerals Limited or give up 38.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

Honeywell International  vs.  Bushveld Minerals Limited

 Performance 
       Timeline  
Honeywell International 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 recent stock price disarray, may contribute to short-term losses for the investors.
Bushveld Minerals 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Bushveld Minerals Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Bushveld Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Honeywell International and Bushveld Minerals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Honeywell International and Bushveld Minerals

The main advantage of trading using opposite Honeywell International and Bushveld Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International position performs unexpectedly, Bushveld Minerals 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 Bushveld Minerals will offset losses from the drop in Bushveld Minerals' long position.
The idea behind Honeywell International and Bushveld Minerals Limited 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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