Correlation Between Boeing and China Overseas

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

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

Diversification Opportunities for Boeing and China Overseas

-0.39

Correlation Coefficient

Boeing  China Overseas

Very good diversification

The 3 months correlation between Boeing and China is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land 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 China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Boeing i.e., Boeing and China Overseas go up and down completely randomly.

Pair Corralation between Boeing and China Overseas

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the China Overseas. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.54 times less risky than China Overseas. The stock trades about -0.01 of its potential returns per unit of risk. The China Overseas Land is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,102  in China Overseas Land on November 29, 2024 and sell it today you would lose (152.00) from holding China Overseas Land or give up 13.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.96%
Values	Daily Returns

The Boeing  vs.  China Overseas Land

Boeing

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 9 (%) 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.

China Overseas Land

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, China Overseas may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Boeing and China Overseas

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

The idea behind The Boeing and China Overseas Land 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.