Correlation Between Boeing and Spirit Aerosystems

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

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

Diversification Opportunities for Boeing and Spirit Aerosystems

0.9

Correlation Coefficient

Boeing  Spirit Aerosystems

Almost no diversification

The 3 months correlation between Boeing and Spirit is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Spirit Aerosystems Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Aerosystems 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 Spirit Aerosystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Aerosystems has no effect on the direction of Boeing i.e., Boeing and Spirit Aerosystems go up and down completely randomly.

Pair Corralation between Boeing and Spirit Aerosystems

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Spirit Aerosystems. In addition to that, Boeing is 1.24 times more volatile than Spirit Aerosystems Holdings. It trades about -0.08 of its total potential returns per unit of risk. Spirit Aerosystems Holdings is currently generating about -0.06 per unit of volatility. If you would invest  3,521  in Spirit Aerosystems Holdings on August 30, 2024 and sell it today you would lose (268.00) from holding Spirit Aerosystems Holdings or give up 7.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

The Boeing  vs.  Spirit Aerosystems Holdings

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.

Spirit Aerosystems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirit Aerosystems Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Boeing and Spirit Aerosystems

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

The idea behind The Boeing and Spirit Aerosystems Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.