Correlation Between Boeing and GENERAL

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

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

Diversification Opportunities for Boeing and GENERAL

-0.72

Correlation Coefficient

Boeing  GENERAL

Pay attention - limited upside

The 3 months correlation between Boeing and GENERAL is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Boeing i.e., Boeing and GENERAL go up and down completely randomly.

Pair Corralation between Boeing and GENERAL

Allowing for the 90-day total investment horizon The Boeing is expected to generate 1.1 times more return on investment than GENERAL. However, Boeing is 1.1 times more volatile than GENERAL ELEC CAP. It trades about 0.02 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.39 per unit of risk. If you would invest  16,277  in The Boeing on September 12, 2024 and sell it today you would earn a total of  250.00  from holding The Boeing or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	28.13%
Values	Daily Returns

The Boeing  vs.  GENERAL ELEC CAP

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

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for GENERAL ELEC CAP investors.

Pair Trading with Boeing and GENERAL

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

The idea behind The Boeing and GENERAL ELEC CAP 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.