Correlation Between Apple and Boeing

Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and The Boeing, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Boeing.

Diversification Opportunities for Apple and Boeing

0.62

Correlation Coefficient

Apple  Boeing

Poor diversification

The 3 months correlation between Apple and Boeing is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Apple 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 Apple Inc 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 Apple i.e., Apple and Boeing go up and down completely randomly.

Pair Corralation between Apple and Boeing

Given the investment horizon of 90 days Apple is expected to generate 1.04 times less return on investment than Boeing. But when comparing it to its historical volatility, Apple Inc is 1.07 times less risky than Boeing. It trades about 0.17 of its potential returns per unit of risk. The Boeing is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  16,782  in The Boeing on February 13, 2024 and sell it today you would earn a total of  1,069  from holding The Boeing or generate 6.37% return on investment over 90 days.

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

Apple Inc  vs.  The Boeing

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Apple and Boeing

The main advantage of trading using opposite Apple and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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.

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 the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.