Correlation Between Basic Materials and Boeing
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and The Boeing, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Boeing.
Diversification Opportunities for Basic Materials and Boeing
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Basic and Boeing is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Boeing go up and down completely randomly.
Pair Corralation between Basic Materials and Boeing
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Boeing. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 1.51 times less risky than Boeing. The index trades about -0.14 of its potential returns per unit of risk. The The Boeing is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 103,671 in The Boeing on November 28, 2024 and sell it today you would lose (1,084) from holding The Boeing or give up 1.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Basic Materials vs. The Boeing
Performance |
| Timeline |
Basic Materials and Boeing Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
The Boeing
Pair trading matchups for Boeing
Pair Trading with Basic Materials and Boeing
The main advantage of trading using opposite Basic Materials and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. United States Steel | Basic Materials vs. Monster Beverage | Basic Materials vs. Liberty Broadband | Basic Materials vs. Molson Coors Beverage |
| Boeing vs. Cardinal Health, | Boeing vs. CM Hospitalar SA | Boeing vs. Alaska Air Group, | Boeing vs. DXC Technology |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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