Correlation Between BorgWarner and Autoliv

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

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

Diversification Opportunities for BorgWarner and Autoliv

-0.08

Correlation Coefficient

BorgWarner  Autoliv

Good diversification

The 3 months correlation between BorgWarner and Autoliv is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and BorgWarner 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 BorgWarner are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of BorgWarner i.e., BorgWarner and Autoliv go up and down completely randomly.

Pair Corralation between BorgWarner and Autoliv

Considering the 90-day investment horizon BorgWarner is expected to generate 0.89 times more return on investment than Autoliv. However, BorgWarner is 1.13 times less risky than Autoliv. It trades about 0.04 of its potential returns per unit of risk. Autoliv is currently generating about 0.02 per unit of risk. If you would invest  3,309  in BorgWarner on September 3, 2024 and sell it today you would earn a total of  123.00  from holding BorgWarner or generate 3.72% return on investment over 90 days.

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

BorgWarner  vs.  Autoliv

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Autoliv

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autoliv are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with BorgWarner and Autoliv

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

The idea behind BorgWarner and Autoliv 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 Valuation module to check real value of public entities based on technical and fundamental data.