Correlation Between MDA and Boeing

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

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

Diversification Opportunities for MDA and Boeing

-0.63

Correlation Coefficient

MDA  Boeing

Excellent diversification

The 3 months correlation between MDA and Boeing is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding MDA and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and MDA 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 MDA 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 MDA i.e., MDA and Boeing go up and down completely randomly.

Pair Corralation between MDA and Boeing

Assuming the 90 days horizon MDA is expected to generate 1.4 times more return on investment than Boeing. However, MDA is 1.4 times more volatile than The Boeing. It trades about 0.14 of its potential returns per unit of risk. The Boeing is currently generating about -0.04 per unit of risk. If you would invest  486.00  in MDA on January 26, 2024 and sell it today you would earn a total of  584.00  from holding MDA or generate 120.16% return on investment over 90 days.

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

MDA  vs.  The Boeing

MDA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MDA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, MDA reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with MDA and Boeing

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

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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 Stocks Directory module to find actively traded stocks across global markets.