Correlation Between Boeing and Vestas Wind

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

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

Diversification Opportunities for Boeing and Vestas Wind

0.42

Correlation Coefficient

Boeing  Vestas Wind

Very weak diversification

The 3 months correlation between Boeing and Vestas is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Boeing i.e., Boeing and Vestas Wind go up and down completely randomly.

Pair Corralation between Boeing and Vestas Wind

Allowing for the 90-day total investment horizon The Boeing is expected to generate 0.57 times more return on investment than Vestas Wind. However, The Boeing is 1.75 times less risky than Vestas Wind. It trades about 0.02 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.19 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  133.00  from holding The Boeing or generate 0.82% return on investment over 90 days.

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

The Boeing  vs.  Vestas Wind Systems

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.

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Boeing and Vestas Wind

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

The idea behind The Boeing and Vestas Wind Systems 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.