Correlation Between Boeing and MEDTRONIC

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

By analyzing existing cross correlation between The Boeing and MEDTRONIC INC 4375, you can compare the effects of market volatilities on Boeing and MEDTRONIC 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 MEDTRONIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and MEDTRONIC.

Diversification Opportunities for Boeing and MEDTRONIC

-0.13

Correlation Coefficient

Boeing  MEDTRONIC

Good diversification

The 3 months correlation between Boeing and MEDTRONIC is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and MEDTRONIC INC 4375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDTRONIC INC 4375 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 MEDTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDTRONIC INC 4375 has no effect on the direction of Boeing i.e., Boeing and MEDTRONIC go up and down completely randomly.

Pair Corralation between Boeing and MEDTRONIC

Allowing for the 90-day total investment horizon The Boeing is expected to generate 1.82 times more return on investment than MEDTRONIC. However, Boeing is 1.82 times more volatile than MEDTRONIC INC 4375. It trades about 0.01 of its potential returns per unit of risk. MEDTRONIC INC 4375 is currently generating about -0.08 per unit of risk. If you would invest  17,934  in The Boeing on December 24, 2024 and sell it today you would lose (123.00) from holding The Boeing or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

The Boeing  vs.  MEDTRONIC INC 4375

Boeing

Risk-Adjusted Performance

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

MEDTRONIC INC 4375

Risk-Adjusted Performance

Very Weak

Over the last 90 days MEDTRONIC INC 4375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MEDTRONIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boeing and MEDTRONIC

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

The idea behind The Boeing and MEDTRONIC INC 4375 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.