Correlation Between Honeywell International and DXC Technology

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

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

Diversification Opportunities for Honeywell International and DXC Technology

-0.44

Correlation Coefficient

Honeywell International  DXC Technology

Very good diversification

The 3 months correlation between Honeywell and DXC is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and DXC Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology 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 DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of Honeywell International i.e., Honeywell International and DXC Technology go up and down completely randomly.

Pair Corralation between Honeywell International and DXC Technology

If you would invest  36,000  in DXC Technology on January 28, 2024 and sell it today you would earn a total of  0.00  from holding DXC Technology or generate 0.0% return on investment over 90 days.

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

Honeywell International  vs.  DXC Technology

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 fairly strong basic indicators, Honeywell International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DXC Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, DXC Technology 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 DXC Technology

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

The idea behind Honeywell International and DXC Technology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.