Correlation Between Boeing and General American

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Can any of the company-specific risk be diversified away by investing in both Boeing and General American 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 General American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boeing Company and General American Investors, you can compare the effects of market volatilities on Boeing and General American 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 General American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and General American.

Diversification Opportunities for Boeing and General American

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Boeing and General is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Company and General American Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General American Inv 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 Boeing Company are associated (or correlated) with General American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General American Inv has no effect on the direction of Boeing i.e., Boeing and General American go up and down completely randomly.

Pair Corralation between Boeing and General American

Allowing for the 90-day total investment horizon Boeing Company is expected to under-perform the General American. In addition to that, Boeing is 2.31 times more volatile than General American Investors. It trades about -0.01 of its total potential returns per unit of risk. General American Investors is currently generating about 0.01 per unit of volatility. If you would invest  4,161  in General American Investors on June 26, 2022 and sell it today you would earn a total of  1.00  from holding General American Investors or generate 0.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Boeing Company  vs.  General American Investors

 Performance (%) 
       Timeline  
Boeing Company 
Boeing Performance
0 of 100
Over the last 90 days Boeing Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Boeing is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Boeing Price Channel

General American Inv 
General Performance
0 of 100
Over the last 90 days General American Investors has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, General American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

General Price Channel

Boeing and General American Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boeing and General American

The main advantage of trading using opposite Boeing and General American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, General American 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 General American will offset losses from the drop in General American's long position.
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The idea behind Boeing Company and General American Investors 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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Check out your portfolio center. 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 CEO Directory module to screen CEOs from public companies around the world.

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