Correlation Between Raytheon Technologies and Boeing

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

By analyzing existing cross correlation between Raytheon Technologies Corp and The Boeing, you can compare the effects of market volatilities on Raytheon Technologies and Boeing 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 Raytheon Technologies with a short position of Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Boeing.

Diversification Opportunities for Raytheon Technologies and Boeing

-0.01

Correlation Coefficient

Raytheon Technologies  Boeing

Good diversification

The 3 months correlation between Raytheon and Boeing is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Raytheon Technologies 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 Raytheon Technologies Corp are associated (or correlated) with Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Boeing go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Boeing

Assuming the 90 days horizon Raytheon Technologies Corp is expected to under-perform the Boeing. But the stock apears to be less risky and, when comparing its historical volatility, Raytheon Technologies Corp is 1.34 times less risky than Boeing. The stock trades about -0.07 of its potential returns per unit of risk. The The Boeing is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  14,754  in The Boeing on September 22, 2024 and sell it today you would earn a total of  2,454  from holding The Boeing or generate 16.63% return on investment over 90 days.

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

Raytheon Technologies Corp  vs.  The Boeing

Raytheon Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Boeing

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Boeing unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Raytheon Technologies and Boeing

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

The idea behind Raytheon Technologies Corp and The Boeing 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.