Correlation Between Boeing and Faraday Future

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

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

Diversification Opportunities for Boeing and Faraday Future

0.85

Correlation Coefficient

Boeing  Faraday Future

Very poor diversification

The 3 months correlation between Boeing and Faraday is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel 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 Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of Boeing i.e., Boeing and Faraday Future go up and down completely randomly.

Pair Corralation between Boeing and Faraday Future

Allowing for the 90-day total investment horizon The Boeing is expected to generate 0.23 times more return on investment than Faraday Future. However, The Boeing is 4.4 times less risky than Faraday Future. It trades about -0.08 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about -0.19 per unit of risk. If you would invest  17,374  in The Boeing on August 30, 2024 and sell it today you would lose (2,134) from holding The Boeing or give up 12.28% of portfolio value over 90 days.

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

The Boeing  vs.  Faraday Future Intelligent

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Faraday Future Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Boeing and Faraday Future

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

The idea behind The Boeing and Faraday Future Intelligent 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.