Correlation Between Boeing and Fastenal

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

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

Diversification Opportunities for Boeing and Fastenal

-0.67

Correlation Coefficient

Boeing  Fastenal

Excellent diversification

The 3 months correlation between Boeing and Fastenal is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Boeing i.e., Boeing and Fastenal go up and down completely randomly.

Pair Corralation between Boeing and Fastenal

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Fastenal. In addition to that, Boeing is 1.15 times more volatile than Fastenal Company. It trades about -0.02 of its total potential returns per unit of risk. Fastenal Company is currently generating about 0.21 per unit of volatility. If you would invest  6,673  in Fastenal Company on September 2, 2024 and sell it today you would earn a total of  1,683  from holding Fastenal Company or generate 25.22% return on investment over 90 days.

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

The Boeing  vs.  Fastenal Company

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fastenal

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fastenal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boeing and Fastenal

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

The idea behind The Boeing and Fastenal Company 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.