Correlation Between Exxon and Boeing

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

Diversification Opportunities for Exxon and Boeing

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between Exxon and Boeing is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Boeing Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing Company and Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Boeing go up and down completely randomly.

Pair Corralation between Exxon and Boeing

Considering the 90-day investment horizon Exxon is expected to generate 3.09 times less return on investment than Boeing. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.23 times less risky than Boeing. It trades about 0.14 of its potential returns per unit of risk. Boeing Company is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  13,699  in Boeing Company on May 12, 2022 and sell it today you would earn a total of  3,203  from holding Boeing Company or generate 23.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Boeing Company

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Exxon 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

Exxon and Boeing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Boeing

The main advantage of trading using opposite Exxon and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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