Correlation Between Boeing and Amada

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

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

Diversification Opportunities for Boeing and Amada

-0.56

Correlation Coefficient

Boeing  Amada

Excellent diversification

The 3 months correlation between Boeing and Amada is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Amada Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amada and Boeing 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 The Boeing are associated (or correlated) with Amada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amada has no effect on the direction of Boeing i.e., Boeing and Amada go up and down completely randomly.

Pair Corralation between Boeing and Amada

Allowing for the 90-day total investment horizon The Boeing is expected to generate 1.83 times more return on investment than Amada. However, Boeing is 1.83 times more volatile than Amada Co. It trades about 0.04 of its potential returns per unit of risk. Amada Co is currently generating about 0.06 per unit of risk. If you would invest  12,939  in The Boeing on January 31, 2024 and sell it today you would earn a total of  4,410  from holding The Boeing or generate 34.08% return on investment over 90 days.

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

The Boeing  vs.  Amada Co

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Amada

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amada Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Amada may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Boeing and Amada

The main advantage of trading using opposite Boeing and Amada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, Amada 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 Amada will offset losses from the drop in Amada's long position.

The idea behind The Boeing and Amada 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.