Correlation Between BHP and Boeing

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

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

Diversification Opportunities for BHP and Boeing

-0.37

Correlation Coefficient

BHP  Boeing

Very good diversification

The 3 months correlation between BHP and Boeing is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and BHP 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 BHP Group 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 BHP i.e., BHP and Boeing go up and down completely randomly.

Pair Corralation between BHP and Boeing

If you would invest  349,000  in The Boeing on October 16, 2024 and sell it today you would earn a total of  3,170  from holding The Boeing or generate 0.91% return on investment over 90 days.

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

BHP Group  vs.  The Boeing

BHP Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, BHP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boeing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Boeing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP and Boeing

The main advantage of trading using opposite BHP and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP 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 BHP Group 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.