Correlation Between BorgWarner and RLX Technology

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

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

Diversification Opportunities for BorgWarner and RLX Technology

-0.72

Correlation Coefficient

BorgWarner  RLX Technology

Pay attention - limited upside

The 3 months correlation between BorgWarner and RLX is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology 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 RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of BorgWarner i.e., BorgWarner and RLX Technology go up and down completely randomly.

Pair Corralation between BorgWarner and RLX Technology

Considering the 90-day investment horizon BorgWarner is expected to under-perform the RLX Technology. But the stock apears to be less risky and, when comparing its historical volatility, BorgWarner is 1.42 times less risky than RLX Technology. The stock trades about -0.04 of its potential returns per unit of risk. The RLX Technology is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  160.00  in RLX Technology on October 23, 2024 and sell it today you would earn a total of  67.00  from holding RLX Technology or generate 41.88% return on investment over 90 days.

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

BorgWarner  vs.  RLX Technology

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 somewhat strong basic indicators, BorgWarner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RLX Technology

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RLX Technology are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, RLX Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BorgWarner and RLX Technology

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

The idea behind BorgWarner and RLX Technology 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.