Correlation Between US Bancorp and Boeing

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

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

Diversification Opportunities for US Bancorp and Boeing

0.43

Correlation Coefficient

US Bancorp  Boeing

Very weak diversification

The 3 months correlation between USB and Boeing is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and Boeing go up and down completely randomly.

Pair Corralation between US Bancorp and Boeing

Assuming the 90 days trading horizon US Bancorp is expected to generate 1.03 times more return on investment than Boeing. However, US Bancorp is 1.03 times more volatile than The Boeing. It trades about 0.11 of its potential returns per unit of risk. The Boeing is currently generating about -0.01 per unit of risk. If you would invest  53,514  in US Bancorp on September 28, 2024 and sell it today you would earn a total of  44,997  from holding US Bancorp or generate 84.08% return on investment over 90 days.

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

US Bancorp  vs.  The Boeing

US Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boeing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Boeing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Bancorp and Boeing

The main advantage of trading using opposite US Bancorp and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US Bancorp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.