Correlation Between Boeing and Innovative Solutions

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

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

Diversification Opportunities for Boeing and Innovative Solutions

-0.48

Correlation Coefficient

Boeing  Innovative Solutions

Very good diversification

The 3 months correlation between Boeing and Innovative is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Co and Innovative Solutions and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Solutions and 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 Innovative Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Solutions and has no effect on the direction of Boeing i.e., Boeing and Innovative Solutions go up and down completely randomly.

Pair Corralation between Boeing and Innovative Solutions

Assuming the 90 days horizon Boeing Co is expected to generate 0.5 times more return on investment than Innovative Solutions. However, Boeing Co is 2.02 times less risky than Innovative Solutions. It trades about 0.24 of its potential returns per unit of risk. Innovative Solutions and is currently generating about 0.11 per unit of risk. If you would invest  5,415  in Boeing Co on September 26, 2024 and sell it today you would earn a total of  792.00  from holding Boeing Co or generate 14.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	32.54%
Values	Daily Returns

Boeing Co  vs.  Innovative Solutions and

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.

Innovative Solutions and

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Boeing and Innovative Solutions

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

The idea behind Boeing Co and Innovative Solutions and 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..