Correlation Between Spirit Aerosystems and Boeing

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

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

Diversification Opportunities for Spirit Aerosystems and Boeing

0.56

Correlation Coefficient

Spirit Aerosystems  Boeing

Very weak diversification

The 3 months correlation between Spirit and Boeing is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Aerosystems Holdings and Boeing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Spirit Aerosystems 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 Spirit Aerosystems Holdings 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 Spirit Aerosystems i.e., Spirit Aerosystems and Boeing go up and down completely randomly.

Pair Corralation between Spirit Aerosystems and Boeing

Considering the 90-day investment horizon Spirit Aerosystems Holdings is expected to under-perform the Boeing. In addition to that, Spirit Aerosystems is 1.02 times more volatile than Boeing Co. It trades about -0.02 of its total potential returns per unit of risk. Boeing Co is currently generating about 0.14 per unit of volatility. If you would invest  5,415  in Boeing Co on September 12, 2024 and sell it today you would earn a total of  360.00  from holding Boeing Co or generate 6.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	46.88%
Values	Daily Returns

Spirit Aerosystems Holdings  vs.  Boeing Co

Spirit Aerosystems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirit Aerosystems Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Spirit Aerosystems is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Boeing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirit Aerosystems and Boeing

The main advantage of trading using opposite Spirit Aerosystems and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Aerosystems 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 Spirit Aerosystems Holdings and Boeing Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.