Correlation Between Boeing and Alfa SAB

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

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

Diversification Opportunities for Boeing and Alfa SAB

0.19

Correlation Coefficient

Boeing  Alfa SAB

Average diversification

The 3 months correlation between Boeing and Alfa is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Alfa SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa SAB de and Boeing 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 The Boeing are associated (or correlated) with Alfa SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa SAB de has no effect on the direction of Boeing i.e., Boeing and Alfa SAB go up and down completely randomly.

Pair Corralation between Boeing and Alfa SAB

Assuming the 90 days horizon The Boeing is expected to generate 0.72 times more return on investment than Alfa SAB. However, The Boeing is 1.39 times less risky than Alfa SAB. It trades about 0.4 of its potential returns per unit of risk. Alfa SAB de is currently generating about 0.02 per unit of risk. If you would invest  312,500  in The Boeing on September 27, 2024 and sell it today you would earn a total of  42,500  from holding The Boeing or generate 13.6% return on investment over 90 days.

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

The Boeing  vs.  Alfa SAB de

Boeing

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Boeing showed solid returns over the last few months and may actually be approaching a breakup point.

Alfa SAB de

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa SAB de are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Alfa SAB is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Boeing and Alfa SAB

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

The idea behind The Boeing and Alfa SAB de 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.