Correlation Between BorgWarner and Mullen Automotive

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

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

Diversification Opportunities for BorgWarner and Mullen Automotive

0.8

Correlation Coefficient

BorgWarner  Mullen Automotive

Very poor diversification

The 3 months correlation between BorgWarner and Mullen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Mullen Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mullen Automotive 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 Mullen Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mullen Automotive has no effect on the direction of BorgWarner i.e., BorgWarner and Mullen Automotive go up and down completely randomly.

Pair Corralation between BorgWarner and Mullen Automotive

Considering the 90-day investment horizon BorgWarner is expected to generate 0.14 times more return on investment than Mullen Automotive. However, BorgWarner is 7.07 times less risky than Mullen Automotive. It trades about -0.13 of its potential returns per unit of risk. Mullen Automotive is currently generating about -0.53 per unit of risk. If you would invest  3,417  in BorgWarner on November 27, 2024 and sell it today you would lose (418.00) from holding BorgWarner or give up 12.23% of portfolio value over 90 days.

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

BorgWarner  vs.  Mullen Automotive

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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Mullen Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mullen Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with BorgWarner and Mullen Automotive

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

The idea behind BorgWarner and Mullen Automotive 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.