BOEING &

BANK OF AMERICA
GROUP 12
Dónal O‘Criodain 16398943
Stanislav Diordiev 22206775
Aryaman Chakraborty 22204644
Shubham Shinde 22200782
Chunyao Li 22200169
 The Boeing Company
• Manufactures, designs, and sells aeroplanes and other aerospace technology in more than 150
countries
• Commercial Aeroplanes; Defence, Space & Security; Global Services; and Boeing Capital.
• Two main competitors: Airbus and Lockheed Martin
• In 2020, Boeing's revenue was $11.8 billion, down due to the pandemic. In 2021, revenue reached
nearly $17 billion
• 12.8% mean annual return since 2002

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 Bank of America
• The second largest bank holding company in the US, with total consolidated assets of $3,111 million
in 2022
• Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global
Markets.
• Main competitor: JPMorgan Chase ($3,841 million total assets)
• In the first half of 2022, Bank of America’s net interest income was $24.0 billion, and net income
applicable to common stockholders was $12.53 billion.
• In July 2022, the company announced a further dividend increase of 4.8%

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 • Month-end returns beginning in September 2002
• Use Wilshire 5000 as a proxy for the market portfolio
• Company and Market returns data from Thompson Eikon
• Use three-month treasuries as a proxy for the Risk-Free
Data & Method rate
• Treasury data from Federal Reserve Bank of St. Louis
• All analysis done in Excel

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 Return Data
BA BAC Mkt Return

Mean Monthly return 0.011 0.007 0.008

Mean Annual return 0.12805 0.08421 0.093634188

Std. Deviation (monthly) 0.089984 0.11484 0.043762251

Std Deviation (annual) 0.311712 0.39782 0.151596886

Correlation BA, BAC 0.401231

Correlation to Mkt 0.588894 0.61503

Beta 1.208641 1.61395

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BA share BAC Share E[Annual Return] E[Excess Annual Return] Std. Deviation

-1.00 2.00 0.040361046 0.011 0.72882343

-0.80 1.80 0.049129968 0.020 0.65700257

-0.60 1.60 0.05789889 0.029 0.587021585

-0.40 1.40 0.066667812 0.037 0.51962437

-0.20 1.20 0.075436734 0.046 0.455958125

0.00 1.00 0.084205656 0.055 0.397818197

0.20 0.80 0.092974578 0.064 0.347985638

0.40 0.60 0.1017435 0.072 0.310486508

0.60 0.40 0.110512422 0.081 0.290142928

0.80 0.20 0.119281344 0.090 0.290580706

1.00 0.00 0.128050266 0.099 0.311712296

1.20 -0.20 0.136819188 0.108 0.349807296

1.40 -0.40 0.14558811 0.116 0.400048639

1.60 -0.60 0.154357032 0.125 0.458460319

1.80 -0.80 0.163125954 0.134 0.522308332

2.00 -1.00 0.171894876 0.143 0.589829895

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 Annual Return
2.50

2.00

1.50

1.00

0.50

0.00

-0.50

-1.00

-1.50

BA Share BAC Share Annual Return

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 Standard Deviati on of Portf olios
BA share BoA Share Std. Deviation

0.210393201892639 0.170269224332447
0.189660305293578 0.150777428160093
0.169458535085676 0.132346094155754
0.150002635078943 0.115484094757281
0.131623773140656 0.10098066821648
2.00 0.11484022156393
0.100454800929748
0.0896297343448656 0.0899835889087453
0.0837570488707685
0.0838834244667121
0.00 2.00
1.80 0.20 1.80
1.60 0.40 1.60
1.40 0.60 1.40
1.20 0.80 1.20
1.00 1.00
0.80
0.60
0.40
0.20
0.00
1 2 3 4 -0.20
5 6 7 8 9 10 11 -0.20
12 13 14 15 16
-0.40 -0.40
-0.60 -0.60
-0.80 -0.80
-1.00 -1.00

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 Efficient Frontier
Returns and Risk
12

10

8
Return

0
0.2 0.3 0.4 0.5 0.6 0.7 0.8

Standard Deviation

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Capital Allocation Line

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 Sharpe & Traynor Ratios
•Sharpe ratio describes how much excess return you receive for the additional risk.

•The higher the ratio, the better its risk-adjusted performance.

•Highest Sharpe ratio is the optimal portfolio giving us 32% of additional return for each unit of risk.

•Traynor ratio describes how much excess return you receive for each unit of systematic risk.

•It is calculated using beta unlike Sharpe ratio which uses standard deviation.

•For the optimal portfolio we obtain excess return of 8% annually per beta.

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Betas

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 Security Market Line
0.160

0.143
0.140
0.134

0.125

0.120 0.116

0.108

0.099
0.100
Portfolio excess Return

0.090

0.081
0.080
0.072

0.064

0.060 0.055

0.046

0.040 0.037

0.029

0.020
0.020
0.011

0.000
0.6 0.8 1 1.2 1.4 1.6 1.8 2 2.2
Beta

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Betas
BA BAC

0.011 0.007
Mean Monthly
0.12805 0.08421
Mean Annual return
0.089984 0.11484
Std. Deviation (monthly)
0.311712 0.39782
Std Deviatoin (annual)
0.401231
Correlation BA, BAC
0.588894 0.61503
Correlation to Mkt
1.208641 1.61395
Beta

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200% BA , -100% BAC

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 Conclusion
• The optimal portfolio: going long 97% of Boeing stock and shorting 3% of Bank of America stock

• The Sharpe ratio for ideal risk-reward combination indicates that we receive approximately 32%
additional return for each unit of risk

• Abnormal negative correlation: when the beta increases, the sensitivity of the portfolio to the
systematic risk of the market increases, causing the returns to fall.

• Bank of America’s sensitivity to market returns is higher, when increasing the share of BAC in our
portfolio, a downward sloping security market line emerges.

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 References
Bank of America. (2022) Profile. Bank of America Corporation. Available at:
https://investor.bankofamerica.com/profile (Accessed: 23 September 2022).

Bloomberg. (2022) Boeing Co/The - Company Profile and News. Bloomberg.com. Available at:
https://www.bloomberg.com/profile/company/BA:US (Accessed: 23 September 2022).

Boeing. (2019) Boeing Company - Investors - Overview. Available at:

Chiffey, M. (2021) Boeing Competitors Analysis : 7 Strongest Competitors - Business Chronicler.

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Any Questions?