Correlation Between Boeing and American Equity

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

By analyzing existing cross correlation between The Boeing and American Equity Investment, you can compare the effects of market volatilities on Boeing and American Equity 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 American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and American Equity.

Diversification Opportunities for Boeing and American Equity

-0.53

Correlation Coefficient

Boeing  American Equity

Excellent diversification

The 3 months correlation between Boeing and American is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve 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 American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of Boeing i.e., Boeing and American Equity go up and down completely randomly.

Pair Corralation between Boeing and American Equity

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the American Equity. In addition to that, Boeing is 5.93 times more volatile than American Equity Investment. It trades about -0.02 of its total potential returns per unit of risk. American Equity Investment is currently generating about 0.16 per unit of volatility. If you would invest  5,521  in American Equity Investment on March 8, 2024 and sell it today you would earn a total of  126.00  from holding American Equity Investment or generate 2.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	64.52%
Values	Daily Returns

The Boeing  vs.  American Equity Investment

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 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.

American Equity Inve

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Boeing and American Equity

The main advantage of trading using opposite Boeing and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, American Equity 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 American Equity will offset losses from the drop in American Equity's long position.

The idea behind The Boeing and American Equity Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.