Correlation Between International Business and Boeing

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

Diversification Opportunities for International Business and Boeing

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between International and Boeing is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Boeing Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing Company and International Business 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 International Business Machines 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 Company has no effect on the direction of International Business i.e., International Business and Boeing go up and down completely randomly.

Pair Corralation between International Business and Boeing

Considering the 90-day investment horizon International Business Machines is expected to generate 0.55 times more return on investment than Boeing. However, International Business Machines is 1.83 times less risky than Boeing. It trades about 0.04 of its potential returns per unit of risk. Boeing Company is currently generating about -0.03 per unit of risk. If you would invest  11,610  in International Business Machines on May 14, 2022 and sell it today you would earn a total of  1,791  from holding International Business Machines or generate 15.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

International Business Machine  vs.  Boeing Company

 Performance (%) 
       Timeline  
International Business 
International Performance
0 of 100
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady fundamental drivers, International Business is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

International Price Channel

Boeing Company 
Boeing Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Company are ranked lower than 12 (%) 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

International Business and Boeing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Boeing

The main advantage of trading using opposite International Business and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines and Boeing Company 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.
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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