Correlation Between Boeing and New Horizon

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

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

Diversification Opportunities for Boeing and New Horizon

0.72

Correlation Coefficient

Boeing  New Horizon

Poor diversification

The 3 months correlation between Boeing and New is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of Boeing i.e., Boeing and New Horizon go up and down completely randomly.

Pair Corralation between Boeing and New Horizon

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the New Horizon. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 12.97 times less risky than New Horizon. The stock trades about -0.16 of its potential returns per unit of risk. The New Horizon Aircraft is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  75.00  in New Horizon Aircraft on October 24, 2024 and sell it today you would earn a total of  15.00  from holding New Horizon Aircraft or generate 20.0% return on investment over 90 days.

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

The Boeing  vs.  New Horizon Aircraft

Boeing

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

New Horizon Aircraft

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, New Horizon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boeing and New Horizon

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

The idea behind The Boeing and New Horizon Aircraft 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.