Correlation Between Lucid and BorgWarner

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

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

Diversification Opportunities for Lucid and BorgWarner

-0.57

Correlation Coefficient

Lucid  BorgWarner

Excellent diversification

The 3 months correlation between Lucid and BorgWarner is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Lucid 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 Lucid Group 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 Lucid i.e., Lucid and BorgWarner go up and down completely randomly.

Pair Corralation between Lucid and BorgWarner

Given the investment horizon of 90 days Lucid is expected to generate 108.0 times less return on investment than BorgWarner. In addition to that, Lucid is 2.84 times more volatile than BorgWarner. It trades about 0.0 of its total potential returns per unit of risk. BorgWarner is currently generating about 0.05 per unit of volatility. If you would invest  3,200  in BorgWarner on October 22, 2024 and sell it today you would earn a total of  29.00  from holding BorgWarner or generate 0.91% return on investment over 90 days.

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

Lucid Group  vs.  BorgWarner

Lucid Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lucid Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward indicators, Lucid exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Lucid and BorgWarner

The main advantage of trading using opposite Lucid and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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 Lucid Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.