Correlation Between International Business and Boeing

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 The Boeing, 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

0.24

Correlation Coefficient

International Business  Boeing

Modest diversification

The 3 months correlation between International and Boeing is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 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 0.66 times more return on investment than Boeing. However, International Business Machines is 1.51 times less risky than Boeing. It trades about 0.09 of its potential returns per unit of risk. The Boeing is currently generating about -0.03 per unit of risk. If you would invest  12,823  in International Business Machines on March 17, 2024 and sell it today you would earn a total of  4,098  from holding International Business Machines or generate 31.96% return on investment over 90 days.

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

International Business Machine  vs.  The Boeing

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Boeing

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days The Boeing 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 latest stock price disturbance, may contribute to short-term losses for the investors.

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 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.