Correlation Between Broadstone Net and BorgWarner

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

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

Diversification Opportunities for Broadstone Net and BorgWarner

0.14

Correlation Coefficient

Broadstone Net  BorgWarner

Average diversification

The 3 months correlation between Broadstone and BorgWarner is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Broadstone Net Lease and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Broadstone Net 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 Broadstone Net Lease 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 Broadstone Net i.e., Broadstone Net and BorgWarner go up and down completely randomly.

Pair Corralation between Broadstone Net and BorgWarner

Considering the 90-day investment horizon Broadstone Net Lease is expected to generate 0.7 times more return on investment than BorgWarner. However, Broadstone Net Lease is 1.44 times less risky than BorgWarner. It trades about 0.04 of its potential returns per unit of risk. BorgWarner is currently generating about 0.02 per unit of risk. If you would invest  1,539  in Broadstone Net Lease on September 4, 2024 and sell it today you would earn a total of  178.00  from holding Broadstone Net Lease or generate 11.57% return on investment over 90 days.

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

Broadstone Net Lease  vs.  BorgWarner

Broadstone Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadstone Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Broadstone Net is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

BorgWarner

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BorgWarner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Broadstone Net and BorgWarner

The main advantage of trading using opposite Broadstone Net and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadstone Net 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 Broadstone Net Lease 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.