Correlation Between Honeywell International and JPMorgan Chase

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

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

Diversification Opportunities for Honeywell International and JPMorgan Chase

0.15

Correlation Coefficient

Honeywell International  JPMorgan Chase

Average diversification

The 3 months correlation between Honeywell and JPMorgan is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase 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 JPMorgan Chase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Chase has no effect on the direction of Honeywell International i.e., Honeywell International and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Honeywell International and JPMorgan Chase

Considering the 90-day investment horizon Honeywell International is expected to generate 0.58 times more return on investment than JPMorgan Chase. However, Honeywell International is 1.72 times less risky than JPMorgan Chase. It trades about -0.24 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about -0.21 per unit of risk. If you would invest  20,118  in Honeywell International on January 20, 2024 and sell it today you would lose (1,010) from holding Honeywell International or give up 5.02% of portfolio value over 90 days.

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

Honeywell International  vs.  JPMorgan Chase Co

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.

JPMorgan Chase

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, JPMorgan Chase may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Honeywell International and JPMorgan Chase

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

The idea behind Honeywell International and JPMorgan Chase Co 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.