Correlation Between Boeing and DOW

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

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

Diversification Opportunities for Boeing and DOW

  Correlation Coefficient
Boeing Company

Very poor diversification

The 3 months correlation between Boeing and DOW is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Company and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW 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 Boeing Company are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Boeing i.e. Boeing and DOW go up and down completely randomly.

Pair Corralation between Boeing and DOW

Allowing for the 30-days total investment horizon, Boeing Company is expected to generate 3.29 times more return on investment than DOW. However, Boeing is 3.29 times more volatile than DOW. It trades about 0.07 of its potential returns per unit of risk. DOW is currently generating about 0.09 per unit of risk. If you would invest  14,733  in Boeing Company on June 10, 2020 and sell it today you would earn a total of  2,595  from holding Boeing Company or generate 17.61% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Boeing Company  vs.  DOW

 Performance (%) 
 Predicted Return Density 
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