Correlation Between New Horizon and Boeing

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

By analyzing existing cross correlation between New Horizon Aircraft and The Boeing, you can compare the effects of market volatilities on New Horizon and Boeing 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 New Horizon with a short position of Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Horizon and Boeing.

Diversification Opportunities for New Horizon and Boeing

0.19

Correlation Coefficient

New Horizon  Boeing

Average diversification

The 3 months correlation between New and Boeing is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding New Horizon Aircraft and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and New Horizon 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 New Horizon Aircraft are associated (or correlated) with Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of New Horizon i.e., New Horizon and Boeing go up and down completely randomly.

Pair Corralation between New Horizon and Boeing

Assuming the 90 days horizon New Horizon Aircraft is expected to generate 9.41 times more return on investment than Boeing. However, New Horizon is 9.41 times more volatile than The Boeing. It trades about 0.09 of its potential returns per unit of risk. The Boeing is currently generating about -0.05 per unit of risk. If you would invest  3.25  in New Horizon Aircraft on December 17, 2024 and sell it today you would earn a total of  0.35  from holding New Horizon Aircraft or generate 10.77% return on investment over 90 days.

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

New Horizon Aircraft  vs.  The Boeing

New Horizon Aircraft

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, New Horizon showed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with New Horizon and Boeing

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

The idea behind New Horizon Aircraft and The Boeing 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.