Correlation Between Boeing and MSC Industrial

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

By analyzing existing cross correlation between The Boeing and MSC Industrial Direct, you can compare the effects of market volatilities on Boeing and MSC Industrial 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 MSC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and MSC Industrial.

Diversification Opportunities for Boeing and MSC Industrial

-0.39

Correlation Coefficient

Boeing  MSC Industrial

Very good diversification

The 3 months correlation between Boeing and MSC is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and MSC Industrial Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSC Industrial Direct 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 MSC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSC Industrial Direct has no effect on the direction of Boeing i.e., Boeing and MSC Industrial go up and down completely randomly.

Pair Corralation between Boeing and MSC Industrial

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the MSC Industrial. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.28 times less risky than MSC Industrial. The stock trades about -0.22 of its potential returns per unit of risk. The MSC Industrial Direct is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,981  in MSC Industrial Direct on August 23, 2024 and sell it today you would earn a total of  432.00  from holding MSC Industrial Direct or generate 5.41% return on investment over 90 days.

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

The Boeing  vs.  MSC Industrial Direct

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

MSC Industrial Direct

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSC Industrial Direct are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, MSC Industrial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Boeing and MSC Industrial

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

The idea behind The Boeing and MSC Industrial Direct 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.