Correlation Between BorgWarner and Stellantis

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

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

Diversification Opportunities for BorgWarner and Stellantis

-0.36

Correlation Coefficient

BorgWarner  Stellantis

Very good diversification

The 3 months correlation between BorgWarner and Stellantis is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Stellantis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellantis NV 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 Stellantis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellantis NV has no effect on the direction of BorgWarner i.e., BorgWarner and Stellantis go up and down completely randomly.

Pair Corralation between BorgWarner and Stellantis

Considering the 90-day investment horizon BorgWarner is expected to generate 0.69 times more return on investment than Stellantis. However, BorgWarner is 1.44 times less risky than Stellantis. It trades about 0.04 of its potential returns per unit of risk. Stellantis NV is currently generating about -0.11 per unit of risk. If you would invest  3,309  in BorgWarner on September 1, 2024 and sell it today you would earn a total of  123.00  from holding BorgWarner or generate 3.72% return on investment over 90 days.

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

BorgWarner  vs.  Stellantis NV

BorgWarner

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Stellantis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stellantis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BorgWarner and Stellantis

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

The idea behind BorgWarner and Stellantis NV 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..