Correlation Between Aeye and BorgWarner

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

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

Diversification Opportunities for Aeye and BorgWarner

0.24

Correlation Coefficient

Aeye  BorgWarner

Modest diversification

The 3 months correlation between Aeye and BorgWarner is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Aeye 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 Aeye Inc 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 Aeye i.e., Aeye and BorgWarner go up and down completely randomly.

Pair Corralation between Aeye and BorgWarner

Given the investment horizon of 90 days Aeye Inc is expected to generate 2.95 times more return on investment than BorgWarner. However, Aeye is 2.95 times more volatile than BorgWarner. It trades about 0.07 of its potential returns per unit of risk. BorgWarner is currently generating about 0.08 per unit of risk. If you would invest  108.00  in Aeye Inc on September 2, 2024 and sell it today you would earn a total of  5.00  from holding Aeye Inc or generate 4.63% return on investment over 90 days.

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

Aeye Inc  vs.  BorgWarner

Aeye Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeye Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Aeye is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with Aeye and BorgWarner

The main advantage of trading using opposite Aeye and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeye 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 Aeye Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.