Correlation Between Boeing and BacTech Environmental

Can any of the company-specific risk be diversified away by investing in both Boeing and BacTech Environmental 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 BacTech Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Boeing and BacTech Environmental, you can compare the effects of market volatilities on Boeing and BacTech Environmental 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 BacTech Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and BacTech Environmental.

Diversification Opportunities for Boeing and BacTech Environmental

0.72

Correlation Coefficient

Boeing  BacTech Environmental

Poor diversification

The 3 months correlation between Boeing and BacTech is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and BacTech Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BacTech Environmental 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 BacTech Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BacTech Environmental has no effect on the direction of Boeing i.e., Boeing and BacTech Environmental go up and down completely randomly.

Pair Corralation between Boeing and BacTech Environmental

Allowing for the 90-day total investment horizon The Boeing is expected to generate 0.28 times more return on investment than BacTech Environmental. However, The Boeing is 3.54 times less risky than BacTech Environmental. It trades about -0.06 of its potential returns per unit of risk. BacTech Environmental is currently generating about -0.02 per unit of risk. If you would invest  15,591  in The Boeing on August 8, 2024 and sell it today you would lose (491.00) from holding The Boeing or give up 3.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

The Boeing  vs.  BacTech Environmental

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BacTech Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BacTech Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, BacTech Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boeing and BacTech Environmental

The main advantage of trading using opposite Boeing and BacTech Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, BacTech Environmental 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 BacTech Environmental will offset losses from the drop in BacTech Environmental's long position.

The idea behind The Boeing and BacTech Environmental 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 Anywhere module to track or share privately all of your investments from the convenience of any device.