Correlation Between BorgWarner and Ayala

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

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

Diversification Opportunities for BorgWarner and Ayala

0.03

Correlation Coefficient

BorgWarner  Ayala

Significant diversification

The 3 months correlation between BorgWarner and Ayala is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Ayala in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala 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 Ayala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala has no effect on the direction of BorgWarner i.e., BorgWarner and Ayala go up and down completely randomly.

Pair Corralation between BorgWarner and Ayala

Considering the 90-day investment horizon BorgWarner is expected to generate 1.27 times less return on investment than Ayala. In addition to that, BorgWarner is 1.05 times more volatile than Ayala. It trades about 0.09 of its total potential returns per unit of risk. Ayala is currently generating about 0.12 per unit of volatility. If you would invest  1,005  in Ayala on September 11, 2024 and sell it today you would earn a total of  130.00  from holding Ayala or generate 12.94% return on investment over 90 days.

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

BorgWarner  vs.  Ayala

BorgWarner

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 7 (%) 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.

Ayala

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with BorgWarner and Ayala

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

The idea behind BorgWarner and Ayala 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 Stocks Directory module to find actively traded stocks across global markets.