Correlation Between Boeing and First Trust
Can any of the company-specific risk be diversified away by investing in both Boeing and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and First Trust Preferred, you can compare the effects of market volatilities on Boeing and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and First Trust.
Diversification Opportunities for Boeing and First Trust
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Boeing and First is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Preferred has no effect on the direction of Boeing i.e., Boeing and First Trust go up and down completely randomly.
Pair Corralation between Boeing and First Trust
Allowing for the 90-day total investment horizon The Boeing is expected to generate 8.0 times more return on investment than First Trust. However, Boeing is 8.0 times more volatile than First Trust Preferred. It trades about 0.1 of its potential returns per unit of risk. First Trust Preferred is currently generating about -0.02 per unit of risk. If you would invest 14,931 in The Boeing on September 1, 2024 and sell it today you would earn a total of 613.00 from holding The Boeing or generate 4.11% 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. First Trust Preferred
Performance |
| Timeline |
| Boeing |
| First Trust Preferred |
Boeing and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and First Trust
The main advantage of trading using opposite Boeing and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Boeing vs. Raytheon Technologies Corp | Boeing vs. Northrop Grumman | Boeing vs. General Dynamics | Boeing vs. L3Harris Technologies |
| First Trust vs. Invesco Variable Rate | First Trust vs. VanEck Preferred Securities | First Trust vs. First Trust Tactical | First Trust vs. First Trust Senior |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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