Correlation Between Boeing and NightFood Holdings

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

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

Diversification Opportunities for Boeing and NightFood Holdings

0.34

Correlation Coefficient

Boeing  NightFood Holdings

Weak diversification

The 3 months correlation between Boeing and NightFood is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and NightFood Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NightFood Holdings 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 NightFood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NightFood Holdings has no effect on the direction of Boeing i.e., Boeing and NightFood Holdings go up and down completely randomly.

Pair Corralation between Boeing and NightFood Holdings

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the NightFood Holdings. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 6.48 times less risky than NightFood Holdings. The stock trades about -0.08 of its potential returns per unit of risk. The NightFood Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.75  in NightFood Holdings on September 4, 2024 and sell it today you would lose (0.75) from holding NightFood Holdings or give up 42.86% of portfolio value over 90 days.

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

The Boeing  vs.  NightFood Holdings

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.

NightFood Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NightFood Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 NightFood Holdings

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

The idea behind The Boeing and NightFood Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.