Correlation Between Boeing and Safran SA

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

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

Diversification Opportunities for Boeing and Safran SA

-0.44

Correlation Coefficient

Boeing  Safran SA

Very good diversification

The 3 months correlation between Boeing and Safran is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Boeing i.e., Boeing and Safran SA go up and down completely randomly.

Pair Corralation between Boeing and Safran SA

Allowing for the 90-day total investment horizon Boeing is expected to generate 7.5 times less return on investment than Safran SA. But when comparing it to its historical volatility, The Boeing is 1.1 times less risky than Safran SA. It trades about 0.01 of its potential returns per unit of risk. Safran SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  21,270  in Safran SA on September 6, 2024 and sell it today you would earn a total of  2,429  from holding Safran SA or generate 11.42% 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.  Safran SA

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Safran SA

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Boeing and Safran SA

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

The idea behind The Boeing and Safran SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.