Correlation Between Boeing and Allison

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

By analyzing existing cross correlation between The Boeing and Allison Transmission 5875, you can compare the effects of market volatilities on Boeing and Allison 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 Allison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Allison.

Diversification Opportunities for Boeing and Allison

-0.43

Correlation Coefficient

Boeing  Allison

Very good diversification

The 3 months correlation between Boeing and Allison is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Allison Transmission 5875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission 5875 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 Allison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allison Transmission 5875 has no effect on the direction of Boeing i.e., Boeing and Allison go up and down completely randomly.

Pair Corralation between Boeing and Allison

Allowing for the 90-day total investment horizon The Boeing is expected to generate 5.44 times more return on investment than Allison. However, Boeing is 5.44 times more volatile than Allison Transmission 5875. It trades about 0.52 of its potential returns per unit of risk. Allison Transmission 5875 is currently generating about -0.19 per unit of risk. If you would invest  14,560  in The Boeing on September 20, 2024 and sell it today you would earn a total of  3,144  from holding The Boeing or generate 21.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

The Boeing  vs.  Allison Transmission 5875

Boeing

Risk-Adjusted Performance

9 of 100

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.

Allison Transmission 5875

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allison Transmission 5875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Allison is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boeing and Allison

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

The idea behind The Boeing and Allison Transmission 5875 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.