Correlation Between CapitaLand Investment and BorgWarner

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

By analyzing existing cross correlation between CapitaLand Investment Limited and BorgWarner, you can compare the effects of market volatilities on CapitaLand Investment and BorgWarner 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 CapitaLand Investment with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of CapitaLand Investment and BorgWarner.

Diversification Opportunities for CapitaLand Investment and BorgWarner

0.09

Correlation Coefficient

CapitaLand Investment  BorgWarner

Significant diversification

The 3 months correlation between CapitaLand and BorgWarner is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and CapitaLand Investment 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 CapitaLand Investment Limited are associated (or correlated) with BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of CapitaLand Investment i.e., CapitaLand Investment and BorgWarner go up and down completely randomly.

Pair Corralation between CapitaLand Investment and BorgWarner

Assuming the 90 days horizon CapitaLand Investment Limited is expected to under-perform the BorgWarner. In addition to that, CapitaLand Investment is 2.08 times more volatile than BorgWarner. It trades about -0.22 of its total potential returns per unit of risk. BorgWarner is currently generating about -0.27 per unit of volatility. If you would invest  3,285  in BorgWarner on December 1, 2024 and sell it today you would lose (308.00) from holding BorgWarner or give up 9.38% of portfolio value over 90 days.

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

CapitaLand Investment Limited  vs.  BorgWarner

CapitaLand Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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

Pair Trading with CapitaLand Investment and BorgWarner

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

The idea behind CapitaLand Investment Limited and BorgWarner 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.