Correlation Between BorgWarner and Cooper Stnd

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

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

Diversification Opportunities for BorgWarner and Cooper Stnd

0.16

Correlation Coefficient

BorgWarner  Cooper Stnd

Average diversification

The 3 months correlation between BorgWarner and Cooper is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Cooper Stnd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cooper Stnd 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 Cooper Stnd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cooper Stnd has no effect on the direction of BorgWarner i.e., BorgWarner and Cooper Stnd go up and down completely randomly.

Pair Corralation between BorgWarner and Cooper Stnd

Considering the 90-day investment horizon BorgWarner is expected to under-perform the Cooper Stnd. But the stock apears to be less risky and, when comparing its historical volatility, BorgWarner is 2.42 times less risky than Cooper Stnd. The stock trades about -0.14 of its potential returns per unit of risk. The Cooper Stnd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Cooper Stnd on December 2, 2024 and sell it today you would earn a total of  9.00  from holding Cooper Stnd or generate 0.6% return on investment over 90 days.

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

BorgWarner  vs.  Cooper Stnd

BorgWarner

Risk-Adjusted Performance

Very Weak

Over the last 90 days BorgWarner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cooper Stnd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cooper Stnd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cooper Stnd is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BorgWarner and Cooper Stnd

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

The idea behind BorgWarner and Cooper Stnd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.