Correlation Between Honeywell International and Toshiba Corp

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

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

Diversification Opportunities for Honeywell International and Toshiba Corp

0.27

Correlation Coefficient

Honeywell International  Toshiba Corp

Modest diversification

The 3 months correlation between Honeywell and Toshiba is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Toshiba Corp PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toshiba Corp PK 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 Toshiba Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toshiba Corp PK has no effect on the direction of Honeywell International i.e., Honeywell International and Toshiba Corp go up and down completely randomly.

Pair Corralation between Honeywell International and Toshiba Corp

Considering the 90-day investment horizon Honeywell International is expected to under-perform the Toshiba Corp. In addition to that, Honeywell International is 1.54 times more volatile than Toshiba Corp PK. It trades about -0.11 of its total potential returns per unit of risk. Toshiba Corp PK is currently generating about 0.02 per unit of volatility. If you would invest  1,490  in Toshiba Corp PK on February 3, 2024 and sell it today you would earn a total of  2.00  from holding Toshiba Corp PK or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.36%
Values	Daily Returns

Honeywell International  vs.  Toshiba Corp PK

Honeywell International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Honeywell International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Toshiba Corp PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toshiba Corp PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Toshiba Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Honeywell International and Toshiba Corp

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

The idea behind Honeywell International and Toshiba Corp PK 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.