Correlation Between BorgWarner and Country Garden

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

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

Diversification Opportunities for BorgWarner and Country Garden

-0.28

Correlation Coefficient

BorgWarner  Country Garden

Very good diversification

The 3 months correlation between BorgWarner and Country is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Country Garden Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Country Garden Holdings 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 Country Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Country Garden Holdings has no effect on the direction of BorgWarner i.e., BorgWarner and Country Garden go up and down completely randomly.

Pair Corralation between BorgWarner and Country Garden

Considering the 90-day investment horizon BorgWarner is expected to generate 185.23 times less return on investment than Country Garden. But when comparing it to its historical volatility, BorgWarner is 11.56 times less risky than Country Garden. It trades about 0.0 of its potential returns per unit of risk. Country Garden Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Country Garden Holdings on October 9, 2024 and sell it today you would lose (15.00) from holding Country Garden Holdings or give up 45.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.8%
Values	Daily Returns

BorgWarner  vs.  Country Garden Holdings

BorgWarner

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BorgWarner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Country Garden Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Country Garden Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Country Garden reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BorgWarner and Country Garden

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

The idea behind BorgWarner and Country Garden Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.