Correlation Between Boeing and Brickell Biotech

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

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

Diversification Opportunities for Boeing and Brickell Biotech

0.74

Correlation Coefficient

Boeing  Brickell Biotech

Poor diversification

The 3 months correlation between Boeing and Brickell is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Brickell Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickell Biotech 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 Brickell Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickell Biotech has no effect on the direction of Boeing i.e., Boeing and Brickell Biotech go up and down completely randomly.

Pair Corralation between Boeing and Brickell Biotech

Allowing for the 90-day total investment horizon The Boeing is expected to generate 0.3 times more return on investment than Brickell Biotech. However, The Boeing is 3.29 times less risky than Brickell Biotech. It trades about 0.03 of its potential returns per unit of risk. Brickell Biotech is currently generating about -0.02 per unit of risk. If you would invest  13,870  in The Boeing on January 19, 2024 and sell it today you would earn a total of  3,151  from holding The Boeing or generate 22.72% return on investment over 90 days.

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

The Boeing  vs.  Brickell Biotech

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 May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Brickell Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickell Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Brickell Biotech is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Boeing and Brickell Biotech

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

The idea behind The Boeing and Brickell Biotech 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..