Correlation Between Boeing Co and Microsoft

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

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

Diversification Opportunities for Boeing Co and Microsoft

0.82

Correlation Coefficient

Boeing Co  Microsoft

Very poor diversification

The 3 months correlation between Boeing and Microsoft is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Co CEDEAR and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Boeing Co 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 CEDEAR are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Boeing Co i.e., Boeing Co and Microsoft go up and down completely randomly.

Pair Corralation between Boeing Co and Microsoft

Assuming the 90 days horizon Boeing Co CEDEAR is expected to under-perform the Microsoft. In addition to that, Boeing Co is 1.44 times more volatile than Microsoft. It trades about -0.17 of its total potential returns per unit of risk. Microsoft is currently generating about -0.16 per unit of volatility. If you would invest  1,817,500  in Microsoft on September 1, 2024 and sell it today you would lose (270,000) from holding Microsoft or give up 14.86% of portfolio value over 90 days.

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

Boeing Co CEDEAR  vs.  Microsoft

Boeing Co CEDEAR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boeing Co CEDEAR 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 fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft 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 somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Boeing Co and Microsoft

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

The idea behind Boeing Co CEDEAR and Microsoft 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.