Correlation Between GM and BOEING

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Can any of the company-specific risk be diversified away by investing in both GM 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 GM and BOEING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BOEING CO, you can compare the effects of market volatilities on GM 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 GM with a short position of BOEING. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BOEING.

Diversification Opportunities for GM and BOEING

-0.35
  Correlation Coefficient
 GM

Very good diversification

The 3 months correlation between GM and BOEING is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BOEING CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOEING CO and GM 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 General Motors 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 CO has no effect on the direction of GM i.e., GM and BOEING go up and down completely randomly.

Pair Corralation between GM and BOEING

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BOEING. In addition to that, GM is 7.55 times more volatile than BOEING CO. It trades about -0.09 of its total potential returns per unit of risk. BOEING CO is currently generating about -0.06 per unit of volatility. If you would invest  9,419  in BOEING CO on November 9, 2024 and sell it today you would lose (43.00) from holding BOEING CO or give up 0.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

General Motors  vs.  BOEING CO

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
BOEING CO 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days BOEING CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BOEING is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

GM and BOEING Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and BOEING

The main advantage of trading using opposite GM and BOEING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.
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The idea behind General Motors and BOEING CO 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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