Correlation Between BorgWarner and ODDITY Tech

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

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

Diversification Opportunities for BorgWarner and ODDITY Tech

0.03

Correlation Coefficient

BorgWarner  ODDITY Tech

Significant diversification

The 3 months correlation between BorgWarner and ODDITY is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and ODDITY Tech Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODDITY Tech 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 ODDITY Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODDITY Tech has no effect on the direction of BorgWarner i.e., BorgWarner and ODDITY Tech go up and down completely randomly.

Pair Corralation between BorgWarner and ODDITY Tech

Considering the 90-day investment horizon BorgWarner is expected to under-perform the ODDITY Tech. But the stock apears to be less risky and, when comparing its historical volatility, BorgWarner is 1.53 times less risky than ODDITY Tech. The stock trades about -0.07 of its potential returns per unit of risk. The ODDITY Tech Ltd is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,288  in ODDITY Tech Ltd on December 29, 2024 and sell it today you would earn a total of  6.00  from holding ODDITY Tech Ltd or generate 0.14% return on investment over 90 days.

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

BorgWarner  vs.  ODDITY Tech Ltd

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 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.

ODDITY Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ODDITY Tech Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, ODDITY Tech is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BorgWarner and ODDITY Tech

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

The idea behind BorgWarner and ODDITY Tech Ltd 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.