Correlation Between Boeing and DICKS Sporting

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

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

Diversification Opportunities for Boeing and DICKS Sporting

0.85

Correlation Coefficient

Boeing  DICKS Sporting

Very poor diversification

The 3 months correlation between Boeing and DICKS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and DICKS Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKS Sporting Goods 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 DICKS Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKS Sporting Goods has no effect on the direction of Boeing i.e., Boeing and DICKS Sporting go up and down completely randomly.

Pair Corralation between Boeing and DICKS Sporting

Assuming the 90 days trading horizon The Boeing is expected to generate 0.91 times more return on investment than DICKS Sporting. However, The Boeing is 1.09 times less risky than DICKS Sporting. It trades about 0.36 of its potential returns per unit of risk. DICKS Sporting Goods is currently generating about 0.19 per unit of risk. If you would invest  14,524  in The Boeing on October 10, 2024 and sell it today you would earn a total of  2,132  from holding The Boeing or generate 14.68% return on investment over 90 days.

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

The Boeing  vs.  DICKS Sporting Goods

Boeing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Boeing exhibited solid returns over the last few months and may actually be approaching a breakup point.

DICKS Sporting Goods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DICKS Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boeing and DICKS Sporting

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

The idea behind The Boeing and DICKS Sporting Goods 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.