Correlation Between Boeing and Northrop Grumman
Can any of the company-specific risk be diversified away by investing in both Boeing and Northrop Grumman 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 Northrop Grumman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and Northrop Grumman, you can compare the effects of market volatilities on Boeing and Northrop Grumman 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 Northrop Grumman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Northrop Grumman.
Diversification Opportunities for Boeing and Northrop Grumman
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Boeing and Northrop is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman 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 Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of Boeing i.e., Boeing and Northrop Grumman go up and down completely randomly.
Pair Corralation between Boeing and Northrop Grumman
Assuming the 90 days trading horizon The Boeing is expected to generate 1.35 times more return on investment than Northrop Grumman. However, Boeing is 1.35 times more volatile than Northrop Grumman. It trades about 0.21 of its potential returns per unit of risk. Northrop Grumman is currently generating about -0.03 per unit of risk. If you would invest 89,600 in The Boeing on September 23, 2024 and sell it today you would earn a total of 20,163 from holding The Boeing or generate 22.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
The Boeing vs. Northrop Grumman
Performance |
Timeline |
Boeing |
Northrop Grumman |
Boeing and Northrop Grumman Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Boeing and Northrop Grumman
The main advantage of trading using opposite Boeing and Northrop Grumman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, Northrop Grumman 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 Northrop Grumman will offset losses from the drop in Northrop Grumman's long position.Boeing vs. Raytheon Technologies | Boeing vs. Lockheed Martin | Boeing vs. Northrop Grumman | Boeing vs. General Dynamics |
Northrop Grumman vs. Paycom Software | Northrop Grumman vs. New Oriental Education | Northrop Grumman vs. STMicroelectronics NV | Northrop Grumman vs. TAL Education Group |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Money Managers Screen money managers from public funds and ETFs managed around the world | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |