Can any of the company-specific risk be diversified away by investing in both Draganfly 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 Draganfly and Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Draganfly and The Boeing, you can compare the effects of market volatilities on Draganfly 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 Draganfly with a short position of Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Draganfly and Boeing.
Diversification Opportunities for Draganfly and Boeing
The 3 months correlation between Draganfly and Boeing is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Draganfly and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Draganfly 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 Draganfly 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 Draganfly i.e., Draganfly and Boeing go up and down completely randomly.
Given the investment horizon of 90 days Draganfly is expected to under-perform the Boeing. In addition to that, Draganfly is 3.51 times more volatile than The Boeing. It trades about -0.01 of its total potential returns per unit of risk. The Boeing is currently generating about 0.06 per unit of volatility. If you would invest 18,627 in The Boeing on September 7, 2023 and sell it today you would earn a total of 5,061 from holding The Boeing or generate 27.17% return on investment over 90 days.
Over the last 90 days Draganfly has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2024. The recent disarray may also be a sign of long period up-swing for the firm insiders.
Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing may actually be approaching a critical reversion point that can send shares even higher in January 2024.
The main advantage of trading using opposite Draganfly and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Draganfly 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 Draganfly 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
View history of all your transactions and understand their impact on performance
Macroaxis helps investors of all levels and skills to maximize the upside of all their holdings and minimize the risk
associated with market volatility, economic swings, and company-specific events. View terms and conditions