Correlation Between Hexcel and Boeing
Can any of the company-specific risk be diversified away by investing in both Hexcel 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 Hexcel and Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hexcel and The Boeing, you can compare the effects of market volatilities on Hexcel 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 Hexcel with a short position of Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hexcel and Boeing.
Diversification Opportunities for Hexcel and Boeing
Very weak diversification
The 3 months correlation between Hexcel and Boeing is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Hexcel 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 Hexcel 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 Hexcel i.e., Hexcel and Boeing go up and down completely randomly.
Pair Corralation between Hexcel and Boeing
Considering the 90-day investment horizon Hexcel is expected to generate 0.89 times more return on investment than Boeing. However, Hexcel is 1.12 times less risky than Boeing. It trades about 0.02 of its potential returns per unit of risk. The Boeing is currently generating about -0.01 per unit of risk. If you would invest 5,764 in Hexcel on August 27, 2024 and sell it today you would earn a total of 355.00 from holding Hexcel or generate 6.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hexcel vs. The Boeing
Performance |
| Timeline |
| Hexcel |
| Boeing |
Hexcel and Boeing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hexcel and Boeing
The main advantage of trading using opposite Hexcel and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexcel 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 Hexcel 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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