Correlation Between Boeing and Leading Edge

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

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

Diversification Opportunities for Boeing and Leading Edge

0.64

Correlation Coefficient

Boeing  Leading Edge

Poor diversification

The 3 months correlation between Boeing and Leading is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials 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 Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Boeing i.e., Boeing and Leading Edge go up and down completely randomly.

Pair Corralation between Boeing and Leading Edge

Allowing for the 90-day total investment horizon The Boeing is expected to generate 0.32 times more return on investment than Leading Edge. However, The Boeing is 3.14 times less risky than Leading Edge. It trades about -0.02 of its potential returns per unit of risk. Leading Edge Materials is currently generating about -0.04 per unit of risk. If you would invest  16,322  in The Boeing on September 4, 2024 and sell it today you would lose (668.00) from holding The Boeing or give up 4.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

The Boeing  vs.  Leading Edge Materials

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Boeing is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Boeing and Leading Edge

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

The idea behind The Boeing and Leading Edge Materials 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.