Correlation Between Boeing and SPDR Gold

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

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

Diversification Opportunities for Boeing and SPDR Gold

-0.37

Correlation Coefficient

Boeing  SPDR Gold

Very good diversification

The 3 months correlation between Boeing and SPDR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares 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 SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Boeing i.e., Boeing and SPDR Gold go up and down completely randomly.

Pair Corralation between Boeing and SPDR Gold

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the SPDR Gold. In addition to that, Boeing is 2.18 times more volatile than SPDR Gold Shares. It trades about -0.08 of its total potential returns per unit of risk. SPDR Gold Shares is currently generating about 0.09 per unit of volatility. If you would invest  23,129  in SPDR Gold Shares on August 30, 2024 and sell it today you would earn a total of  1,220  from holding SPDR Gold Shares or generate 5.27% return on investment over 90 days.

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

The Boeing  vs.  SPDR Gold Shares

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 weak 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.

SPDR Gold Shares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, SPDR Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Boeing and SPDR Gold

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

The idea behind The Boeing and SPDR Gold Shares 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.