Correlation Between Boeing and Tenneco

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

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

Diversification Opportunities for Boeing and Tenneco

-0.26

Correlation Coefficient

Boeing  Tenneco

Very good diversification

The 3 months correlation between Boeing and Tenneco is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Tenneco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenneco 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 Tenneco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenneco has no effect on the direction of Boeing i.e., Boeing and Tenneco go up and down completely randomly.

Pair Corralation between Boeing and Tenneco

Allowing for the 90-day total investment horizon Boeing is expected to generate 2.44 times less return on investment than Tenneco. In addition to that, Boeing is 1.16 times more volatile than Tenneco. It trades about 0.05 of its total potential returns per unit of risk. Tenneco is currently generating about 0.14 per unit of volatility. If you would invest  1,539  in Tenneco on February 4, 2024 and sell it today you would earn a total of  460.00  from holding Tenneco or generate 29.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.16%
Values	Daily Returns

The Boeing  vs.  Tenneco

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Tenneco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenneco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Tenneco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Boeing and Tenneco

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

The idea behind The Boeing and Tenneco 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.