Correlation Between Boeing and Beacon Roofing

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

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

Diversification Opportunities for Boeing and Beacon Roofing

0.05

Correlation Coefficient

Boeing  Beacon Roofing

Significant diversification

The 3 months correlation between Boeing and Beacon is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Beacon Roofing Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beacon Roofing Supply 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 Beacon Roofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beacon Roofing Supply has no effect on the direction of Boeing i.e., Boeing and Beacon Roofing go up and down completely randomly.

Pair Corralation between Boeing and Beacon Roofing

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Beacon Roofing. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.16 times less risky than Beacon Roofing. The stock trades about -0.04 of its potential returns per unit of risk. The Beacon Roofing Supply is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,546  in Beacon Roofing Supply on August 2, 2024 and sell it today you would earn a total of  1.00  from holding Beacon Roofing Supply or generate 0.01% return on investment over 90 days.

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

The Boeing  vs.  Beacon Roofing Supply

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.

Beacon Roofing Supply

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Beacon Roofing may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Boeing and Beacon Roofing

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

The idea behind The Boeing and Beacon Roofing Supply 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..