Correlation Between CPI Aerostructures and Boeing

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

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

Diversification Opportunities for CPI Aerostructures and Boeing

0.58

Correlation Coefficient

CPI Aerostructures  Boeing

Very weak diversification

The 3 months correlation between CPI and Boeing is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and CPI Aerostructures 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 CPI Aerostructures 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 CPI Aerostructures i.e., CPI Aerostructures and Boeing go up and down completely randomly.

Pair Corralation between CPI Aerostructures and Boeing

Considering the 90-day investment horizon CPI Aerostructures is expected to generate 1.73 times more return on investment than Boeing. However, CPI Aerostructures is 1.73 times more volatile than The Boeing. It trades about 0.08 of its potential returns per unit of risk. The Boeing is currently generating about 0.11 per unit of risk. If you would invest  336.00  in CPI Aerostructures on September 22, 2024 and sell it today you would earn a total of  49.00  from holding CPI Aerostructures or generate 14.58% return on investment over 90 days.

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

CPI Aerostructures  vs.  The Boeing

CPI Aerostructures

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPI Aerostructures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CPI Aerostructures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Boeing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 8 (%) 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 CPI Aerostructures and Boeing

The main advantage of trading using opposite CPI Aerostructures and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPI Aerostructures 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 CPI Aerostructures 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.