Correlation Between Boeing and Kawasaki Heavy

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

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

Diversification Opportunities for Boeing and Kawasaki Heavy

-0.38

Correlation Coefficient

Boeing  Kawasaki Heavy

Very good diversification

The 3 months correlation between Boeing and Kawasaki is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Kawasaki Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasaki Heavy Industries 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 Kawasaki Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasaki Heavy Industries has no effect on the direction of Boeing i.e., Boeing and Kawasaki Heavy go up and down completely randomly.

Pair Corralation between Boeing and Kawasaki Heavy

Allowing for the 90-day total investment horizon Boeing is expected to generate 12.53 times less return on investment than Kawasaki Heavy. But when comparing it to its historical volatility, The Boeing is 1.33 times less risky than Kawasaki Heavy. It trades about 0.02 of its potential returns per unit of risk. Kawasaki Heavy Industries is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,870  in Kawasaki Heavy Industries on December 26, 2024 and sell it today you would earn a total of  675.00  from holding Kawasaki Heavy Industries or generate 36.1% return on investment over 90 days.

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

The Boeing  vs.  Kawasaki Heavy Industries

Boeing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Boeing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kawasaki Heavy Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasaki Heavy Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Kawasaki Heavy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boeing and Kawasaki Heavy

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

The idea behind The Boeing and Kawasaki Heavy Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.