Correlation Between Knife River and Boeing

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

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

Diversification Opportunities for Knife River and Boeing

0.66

Correlation Coefficient

Knife River  Boeing

Poor diversification

The 3 months correlation between Knife and Boeing is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Knife River 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 Knife River 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 Knife River i.e., Knife River and Boeing go up and down completely randomly.

Pair Corralation between Knife River and Boeing

Considering the 90-day investment horizon Knife River is expected to under-perform the Boeing. In addition to that, Knife River is 1.27 times more volatile than The Boeing. It trades about -0.03 of its total potential returns per unit of risk. The Boeing is currently generating about 0.0 per unit of volatility. If you would invest  18,072  in The Boeing on December 27, 2024 and sell it today you would lose (161.00) from holding The Boeing or give up 0.89% of portfolio value over 90 days.

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

Knife River  vs.  The Boeing

Knife River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Knife River is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Knife River and Boeing

The main advantage of trading using opposite Knife River and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River 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 Knife River 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.