Correlation Between Raytheon Technologies and Boeing

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

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

Diversification Opportunities for Raytheon Technologies and Boeing

0.52

Correlation Coefficient

Raytheon Technologies  Boeing

Very weak diversification

The 3 months correlation between Raytheon and Boeing is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies i.e., Raytheon Technologies and Boeing go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Boeing

Assuming the 90 days trading horizon Raytheon Technologies is expected to generate 0.63 times more return on investment than Boeing. However, Raytheon Technologies is 1.59 times less risky than Boeing. It trades about 0.17 of its potential returns per unit of risk. The Boeing is currently generating about -0.01 per unit of risk. If you would invest  6,869  in Raytheon Technologies on September 27, 2024 and sell it today you would earn a total of  5,096  from holding Raytheon Technologies or generate 74.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.62%
Values	Daily Returns

Raytheon Technologies  vs.  The Boeing

Raytheon Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boeing

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Raytheon Technologies and Boeing

The main advantage of trading using opposite Raytheon Technologies and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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 Raytheon Technologies 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.