Correlation Between Hexcel and Boeing

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

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

Diversification Opportunities for Hexcel and Boeing

0.55

Correlation Coefficient

Hexcel  Boeing

Very weak diversification

The 3 months correlation between Hexcel and Boeing is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Hexcel 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 Hexcel 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 Hexcel i.e., Hexcel and Boeing go up and down completely randomly.

Pair Corralation between Hexcel and Boeing

Considering the 90-day investment horizon Hexcel is expected to under-perform the Boeing. But the stock apears to be less risky and, when comparing its historical volatility, Hexcel is 1.24 times less risky than Boeing. The stock trades about -0.05 of its potential returns per unit of risk. The The Boeing is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  18,072  in The Boeing on December 27, 2024 and sell it today you would lose (217.00) from holding The Boeing or give up 1.2% of portfolio value over 90 days.

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

Hexcel  vs.  The Boeing

Hexcel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hexcel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Hexcel is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Hexcel and Boeing

The main advantage of trading using opposite Hexcel and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexcel 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 Hexcel 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.