Correlation Between Boeing and WuXi Biologics
Can any of the company-specific risk be diversified away by investing in both Boeing and WuXi Biologics 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 WuXi Biologics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and WuXi Biologics, you can compare the effects of market volatilities on Boeing and WuXi Biologics 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 WuXi Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and WuXi Biologics.
Diversification Opportunities for Boeing and WuXi Biologics
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Boeing and WuXi is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and WuXi Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi Biologics 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 WuXi Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi Biologics has no effect on the direction of Boeing i.e., Boeing and WuXi Biologics go up and down completely randomly.
Pair Corralation between Boeing and WuXi Biologics
Allowing for the 90-day total investment horizon The Boeing is expected to generate 0.4 times more return on investment than WuXi Biologics. However, The Boeing is 2.51 times less risky than WuXi Biologics. It trades about -0.02 of its potential returns per unit of risk. WuXi Biologics is currently generating about -0.04 per unit of risk. If you would invest 19,353 in The Boeing on September 4, 2024 and sell it today you would lose (3,699) from holding The Boeing or give up 19.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Boeing vs. WuXi Biologics
Performance |
| Timeline |
| Boeing |
| WuXi Biologics |
Boeing and WuXi Biologics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and WuXi Biologics
The main advantage of trading using opposite Boeing and WuXi Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, WuXi Biologics 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 WuXi Biologics will offset losses from the drop in WuXi Biologics' long position.The idea behind The Boeing and WuXi Biologics 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.| WuXi Biologics vs. Therapeutic Solutions International | WuXi Biologics vs. Alpha Cognition | WuXi Biologics vs. Vg Life Sciences | WuXi Biologics vs. Adagene |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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