Correlation Between Boeing and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both Boeing and GE Aerospace 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 GE Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boeing Co and GE Aerospace, you can compare the effects of market volatilities on Boeing and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and GE Aerospace.
Diversification Opportunities for Boeing and GE Aerospace
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Boeing and GE Aerospace is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Co and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 Boeing Co are associated (or correlated) with GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Boeing i.e., Boeing and GE Aerospace go up and down completely randomly.
Pair Corralation between Boeing and GE Aerospace
Assuming the 90 days horizon Boeing Co is expected to under-perform the GE Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, Boeing Co is 1.14 times less risky than GE Aerospace. The stock trades about -0.03 of its potential returns per unit of risk. The GE Aerospace is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 9,667 in GE Aerospace on August 26, 2024 and sell it today you would earn a total of 8,448 from holding GE Aerospace or generate 87.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 8.03% |
| Values | Daily Returns |
Boeing Co vs. GE Aerospace
Performance |
| Timeline |
| Boeing |
| GE Aerospace |
Boeing and GE Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and GE Aerospace
The main advantage of trading using opposite Boeing and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace's long position.The idea behind Boeing Co and GE Aerospace 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.| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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