Correlation Between Boeing and Textron

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

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

Diversification Opportunities for Boeing and Textron

-0.57

Correlation Coefficient

Boeing  Textron

Excellent diversification

The 3 months correlation between Boeing and Textron is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Boeing i.e., Boeing and Textron go up and down completely randomly.

Pair Corralation between Boeing and Textron

Assuming the 90 days horizon Boeing is expected to generate 46.8 times less return on investment than Textron. In addition to that, Boeing is 1.52 times more volatile than Textron. It trades about 0.0 of its total potential returns per unit of risk. Textron is currently generating about 0.04 per unit of volatility. If you would invest  136,846  in Textron on September 14, 2024 and sell it today you would earn a total of  28,689  from holding Textron or generate 20.96% return on investment over 90 days.

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

The Boeing  vs.  Textron

Boeing

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Boeing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Textron

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Boeing and Textron

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

The idea behind The Boeing and Textron 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.