Correlation Between Boeing and Electronic Control

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

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

Diversification Opportunities for Boeing and Electronic Control

-0.49

Correlation Coefficient

Boeing  Electronic Control

Very good diversification

The 3 months correlation between Boeing and Electronic is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Electronic Control Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Control 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 Electronic Control. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Control has no effect on the direction of Boeing i.e., Boeing and Electronic Control go up and down completely randomly.

Pair Corralation between Boeing and Electronic Control

Allowing for the 90-day total investment horizon Boeing is expected to generate 595.25 times less return on investment than Electronic Control. But when comparing it to its historical volatility, The Boeing is 1.77 times less risky than Electronic Control. It trades about 0.0 of its potential returns per unit of risk. Electronic Control Security is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Electronic Control Security on February 20, 2024 and sell it today you would earn a total of  0.07  from holding Electronic Control Security or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Boeing  vs.  Electronic Control Security

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 unsteady 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.

Electronic Control

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Control Security are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Electronic Control unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boeing and Electronic Control

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

The idea behind The Boeing and Electronic Control Security 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.