Correlation Between Apogee Enterprises and BorgWarner

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

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

Diversification Opportunities for Apogee Enterprises and BorgWarner

0.37

Correlation Coefficient

Apogee Enterprises  BorgWarner

Weak diversification

The 3 months correlation between Apogee and BorgWarner is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Apogee Enterprises and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Apogee Enterprises 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 Apogee Enterprises are associated (or correlated) with BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Apogee Enterprises i.e., Apogee Enterprises and BorgWarner go up and down completely randomly.

Pair Corralation between Apogee Enterprises and BorgWarner

Given the investment horizon of 90 days Apogee Enterprises is expected to generate 1.99 times more return on investment than BorgWarner. However, Apogee Enterprises is 1.99 times more volatile than BorgWarner. It trades about 0.12 of its potential returns per unit of risk. BorgWarner is currently generating about 0.08 per unit of risk. If you would invest  6,308  in Apogee Enterprises on September 12, 2024 and sell it today you would earn a total of  1,692  from holding Apogee Enterprises or generate 26.82% return on investment over 90 days.

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

Apogee Enterprises  vs.  BorgWarner

Apogee Enterprises

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apogee Enterprises are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Apogee Enterprises reported solid returns over the last few months and may actually be approaching a breakup point.

BorgWarner

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, BorgWarner may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apogee Enterprises and BorgWarner

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

The idea behind Apogee Enterprises and BorgWarner 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.