Correlation Between BorgWarner and Harley Davidson
Can any of the company-specific risk be diversified away by investing in both BorgWarner and Harley Davidson 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 Harley Davidson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Harley Davidson, you can compare the effects of market volatilities on BorgWarner and Harley Davidson 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 Harley Davidson. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Harley Davidson.
Diversification Opportunities for BorgWarner and Harley Davidson
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BorgWarner and Harley is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Harley Davidson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harley Davidson 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 Harley Davidson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harley Davidson has no effect on the direction of BorgWarner i.e., BorgWarner and Harley Davidson go up and down completely randomly.
Pair Corralation between BorgWarner and Harley Davidson
Considering the 90-day investment horizon BorgWarner is expected to generate 0.78 times more return on investment than Harley Davidson. However, BorgWarner is 1.28 times less risky than Harley Davidson. It trades about -0.07 of its potential returns per unit of risk. Harley Davidson is currently generating about -0.1 per unit of risk. If you would invest 3,207 in BorgWarner on December 27, 2024 and sell it today you would lose (257.00) from holding BorgWarner or give up 8.01% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BorgWarner vs. Harley Davidson
Performance |
Timeline |
BorgWarner |
Harley Davidson |
BorgWarner and Harley Davidson Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BorgWarner and Harley Davidson
The main advantage of trading using opposite BorgWarner and Harley Davidson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Harley Davidson 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 Harley Davidson will offset losses from the drop in Harley Davidson's long position.BorgWarner vs. Lear Corporation | BorgWarner vs. Autoliv | BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation |
Harley Davidson vs. MagnaChip Semiconductor | Harley Davidson vs. KLA Tencor | Harley Davidson vs. Microchip Technology | Harley Davidson vs. SL Green Realty |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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