Correlation Between Boeing and Ducommun Incorporated

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

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

Diversification Opportunities for Boeing and Ducommun Incorporated

-0.57

Correlation Coefficient

Boeing  Ducommun Incorporated

Excellent diversification

The 3 months correlation between Boeing and Ducommun is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated 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 Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of Boeing i.e., Boeing and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between Boeing and Ducommun Incorporated

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Ducommun Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.19 times less risky than Ducommun Incorporated. The stock trades about -0.02 of its potential returns per unit of risk. The Ducommun Incorporated is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,380  in Ducommun Incorporated on January 24, 2024 and sell it today you would earn a total of  25.00  from holding Ducommun Incorporated or generate 0.46% return on investment over 90 days.

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

The Boeing  vs.  Ducommun Incorporated

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.

Ducommun Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ducommun Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Boeing and Ducommun Incorporated

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

The idea behind The Boeing and Ducommun Incorporated 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.