Correlation Between Boeing and NextSource Materials

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

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

Diversification Opportunities for Boeing and NextSource Materials

0.63

Correlation Coefficient

Boeing  NextSource Materials

Poor diversification

The 3 months correlation between Boeing and NextSource is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource 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 NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Boeing i.e., Boeing and NextSource Materials go up and down completely randomly.

Pair Corralation between Boeing and NextSource Materials

Allowing for the 90-day total investment horizon The Boeing is expected to generate 0.48 times more return on investment than NextSource Materials. However, The Boeing is 2.09 times less risky than NextSource Materials. It trades about -0.01 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.06 per unit of risk. If you would invest  18,568  in The Boeing on September 7, 2024 and sell it today you would lose (2,901) from holding The Boeing or give up 15.62% of portfolio value over 90 days.

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

The Boeing  vs.  NextSource Materials

Boeing

Risk-Adjusted Performance

0 of 100

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 newest stock price disturbance, may contribute to short-term losses for the investors.

NextSource Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextSource 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 fundamental 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 NextSource Materials

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

The idea behind The Boeing and NextSource 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.