Correlation Between Boeing and AMERICAN

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

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

Diversification Opportunities for Boeing and AMERICAN

-0.32

Correlation Coefficient

Boeing  AMERICAN

Very good diversification

The 3 months correlation between Boeing and AMERICAN is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and AMERICAN FINL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN FINL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN FINL GROUP has no effect on the direction of Boeing i.e., Boeing and AMERICAN go up and down completely randomly.

Pair Corralation between Boeing and AMERICAN

Allowing for the 90-day total investment horizon The Boeing is expected to generate 0.6 times more return on investment than AMERICAN. However, The Boeing is 1.68 times less risky than AMERICAN. It trades about 0.3 of its potential returns per unit of risk. AMERICAN FINL GROUP is currently generating about 0.06 per unit of risk. If you would invest  15,704  in The Boeing on October 10, 2024 and sell it today you would earn a total of  1,547  from holding The Boeing or generate 9.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

The Boeing  vs.  AMERICAN FINL GROUP

Boeing

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 11 (%) 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.

AMERICAN FINL GROUP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN FINL GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boeing and AMERICAN

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

The idea behind The Boeing and AMERICAN FINL GROUP 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.