Correlation Between Boeing and Consumer Discretionary

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Can any of the company-specific risk be diversified away by investing in both Boeing and Consumer Discretionary 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 Consumer Discretionary into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and Consumer Discretionary Select, you can compare the effects of market volatilities on Boeing and Consumer Discretionary 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 Consumer Discretionary. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Consumer Discretionary.

Diversification Opportunities for Boeing and Consumer Discretionary

BoeingConsumerDiversified AwayBoeingConsumerDiversified Away100%
0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Boeing and Consumer is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Consumer Discretionary Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary 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 Consumer Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of Boeing i.e., Boeing and Consumer Discretionary go up and down completely randomly.

Pair Corralation between Boeing and Consumer Discretionary

Allowing for the 90-day total investment horizon The Boeing is expected to generate 1.76 times more return on investment than Consumer Discretionary. However, Boeing is 1.76 times more volatile than Consumer Discretionary Select. It trades about 0.03 of its potential returns per unit of risk. Consumer Discretionary Select is currently generating about -0.24 per unit of risk. If you would invest  17,606  in The Boeing on November 25, 2024 and sell it today you would earn a total of  109.00  from holding The Boeing or generate 0.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Boeing  vs.  Consumer Discretionary Select

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 05101520253035
JavaScript chart by amCharts 3.21.15BA XLY
       Timeline  
Boeing 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb145150155160165170175180185
Consumer Discretionary 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Consumer Discretionary Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Consumer Discretionary is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb215220225230235240

Boeing and Consumer Discretionary Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.09-3.81-2.53-1.260.01.362.84.235.667.1 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15BA XLY
       Returns  

Pair Trading with Boeing and Consumer Discretionary

The main advantage of trading using opposite Boeing and Consumer Discretionary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, Consumer Discretionary 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 Consumer Discretionary will offset losses from the drop in Consumer Discretionary's long position.
The idea behind The Boeing and Consumer Discretionary Select 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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