Correlation Between Boeing and Essential Energy

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

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

Diversification Opportunities for Boeing and Essential Energy

-0.36

Correlation Coefficient

Boeing  Essential Energy

Very good diversification

The 3 months correlation between Boeing and Essential is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Essential Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Energy Services 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 Essential Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Energy Services has no effect on the direction of Boeing i.e., Boeing and Essential Energy go up and down completely randomly.

Pair Corralation between Boeing and Essential Energy

If you would invest  28.00  in Essential Energy Services on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Essential Energy Services or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.3%
Values	Daily Returns

The Boeing  vs.  Essential Energy Services

Boeing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Boeing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Essential Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essential Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Essential Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boeing and Essential Energy

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

The idea behind The Boeing and Essential Energy Services 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.