Correlation Between Boeing and Textron

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Can any of the company-specific risk be diversified away by investing in both Boeing and Textron 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 Textron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and Textron, you can compare the effects of market volatilities on Boeing and Textron 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 Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Textron.

Diversification Opportunities for Boeing and Textron

BoeingTextronDiversified AwayBoeingTextronDiversified Away100%
-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Boeing and Textron is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Boeing i.e., Boeing and Textron go up and down completely randomly.

Pair Corralation between Boeing and Textron

Assuming the 90 days horizon The Boeing is expected to generate 1.18 times more return on investment than Textron. However, Boeing is 1.18 times more volatile than Textron. It trades about 0.11 of its potential returns per unit of risk. Textron is currently generating about -0.07 per unit of risk. If you would invest  14,768  in The Boeing on October 20, 2024 and sell it today you would earn a total of  1,908  from holding The Boeing or generate 12.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Boeing  vs.  Textron

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -50510152025
JavaScript chart by amCharts 3.21.15BCO TXT
       Timeline  
Boeing 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
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 nearly fragile basic indicators, Boeing reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan130135140145150155160165170
Textron 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan727476788082

Boeing and Textron Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.93-4.44-2.95-1.460.01.583.24.816.42 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15BCO TXT
       Returns  

Pair Trading with Boeing and Textron

The main advantage of trading using opposite Boeing and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.
The idea behind The Boeing and Textron 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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