Correlation Between Boeing and Sumitomo

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

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

Diversification Opportunities for Boeing and Sumitomo

0.08

Correlation Coefficient

Boeing  Sumitomo

Significant diversification

The 3 months correlation between Boeing and Sumitomo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Sumitomo Mitsui FG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui FG 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 Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui FG has no effect on the direction of Boeing i.e., Boeing and Sumitomo go up and down completely randomly.

Pair Corralation between Boeing and Sumitomo

Allowing for the 90-day total investment horizon The Boeing is expected to generate 5.41 times more return on investment than Sumitomo. However, Boeing is 5.41 times more volatile than Sumitomo Mitsui FG. It trades about 0.01 of its potential returns per unit of risk. Sumitomo Mitsui FG is currently generating about -0.24 per unit of risk. If you would invest  15,507  in The Boeing on September 5, 2024 and sell it today you would lose (7.00) from holding The Boeing or give up 0.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

The Boeing  vs.  Sumitomo Mitsui FG

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 somewhat strong basic indicators, Boeing is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Sumitomo Mitsui FG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Mitsui FG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sumitomo is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boeing and Sumitomo

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

The idea behind The Boeing and Sumitomo Mitsui FG 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.