Correlation Between Boeing and EBay

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

Diversification Opportunities for Boeing and EBay

0.86
  Correlation Coefficient

Very poor diversification

The 1 month correlation between Boeing and EBay is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and EBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBay Inc has no effect on the direction of Boeing i.e., Boeing and EBay go up and down completely randomly.

Pair Corralation between Boeing and EBay

Allowing for the 90-day total investment horizon The Boeing is expected to generate 1.2 times more return on investment than EBay. However, Boeing is 1.2 times more volatile than EBay Inc. It trades about -0.02 of its potential returns per unit of risk. EBay Inc is currently generating about -0.03 per unit of risk. If you would invest  24,834  in The Boeing on September 3, 2022 and sell it today you would lose (7,256)  from holding The Boeing or give up 29.22% of portfolio value over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

The Boeing  vs.  EBay Inc

 Performance (%) 
       Timeline  
Boeing 
Boeing Performance
30 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Boeing Price Channel

EBay Inc 
EBay Performance
21 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in EBay Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, EBay showed solid returns over the last few months and may actually be approaching a breakup point.

EBay Price Channel

Boeing and EBay Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boeing and EBay

The main advantage of trading using opposite Boeing and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.
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The idea behind The Boeing and EBay Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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