Correlation Between Boeing and AAR Corp

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

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

Diversification Opportunities for Boeing and AAR Corp

-0.45

Correlation Coefficient

Boeing  AAR Corp

Very good diversification

The 3 months correlation between Boeing and AAR is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Co and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp 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 Boeing Co are associated (or correlated) with AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Boeing i.e., Boeing and AAR Corp go up and down completely randomly.

Pair Corralation between Boeing and AAR Corp

Assuming the 90 days horizon Boeing Co is expected to generate 0.54 times more return on investment than AAR Corp. However, Boeing Co is 1.84 times less risky than AAR Corp. It trades about 0.6 of its potential returns per unit of risk. AAR Corp is currently generating about -0.36 per unit of risk. If you would invest  5,450  in Boeing Co on September 26, 2024 and sell it today you would earn a total of  757.00  from holding Boeing Co or generate 13.89% return on investment over 90 days.

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

Boeing Co  vs.  AAR Corp

Boeing

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

AAR Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, AAR Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Boeing and AAR Corp

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

The idea behind Boeing Co and AAR Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.