Correlation Between Boeing and US Bancorp

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

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

Diversification Opportunities for Boeing and US Bancorp

0.43

Correlation Coefficient

Boeing  US Bancorp

Very weak diversification

The 3 months correlation between Boeing and USB is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Boeing i.e., Boeing and US Bancorp go up and down completely randomly.

Pair Corralation between Boeing and US Bancorp

Assuming the 90 days horizon The Boeing is expected to under-perform the US Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.03 times less risky than US Bancorp. The stock trades about -0.01 of its potential returns per unit of risk. The US Bancorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  53,514  in US Bancorp on September 28, 2024 and sell it today you would earn a total of  44,997  from holding US Bancorp or generate 84.08% return on investment over 90 days.

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

The Boeing  vs.  US Bancorp

Boeing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Boeing showed solid returns over the last few months and may actually be approaching a breakup point.

US Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Boeing and US Bancorp

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

The idea behind The Boeing and US Bancorp 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.