Correlation Between BorgWarner and US Global

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

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

Diversification Opportunities for BorgWarner and US Global

0.29

Correlation Coefficient

BorgWarner  US Global

Modest diversification

The 3 months correlation between BorgWarner and GROW is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and US Global Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Investors 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Investors has no effect on the direction of BorgWarner i.e., BorgWarner and US Global go up and down completely randomly.

Pair Corralation between BorgWarner and US Global

Considering the 90-day investment horizon BorgWarner is expected to under-perform the US Global. In addition to that, BorgWarner is 1.35 times more volatile than US Global Investors. It trades about -0.11 of its total potential returns per unit of risk. US Global Investors is currently generating about -0.04 per unit of volatility. If you would invest  251.00  in US Global Investors on October 5, 2024 and sell it today you would lose (7.90) from holding US Global Investors or give up 3.15% of portfolio value over 90 days.

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

BorgWarner  vs.  US Global Investors

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.

US Global Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Global Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, US Global is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with BorgWarner and US Global

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

The idea behind BorgWarner and US Global Investors 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.