Correlation Between Compagnie Gnrale and BorgWarner

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

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

Diversification Opportunities for Compagnie Gnrale and BorgWarner

0.44

Correlation Coefficient

Compagnie Gnrale  BorgWarner

Very weak diversification

The 3 months correlation between Compagnie and BorgWarner is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Gnrale des and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Compagnie Gnrale 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 Compagnie Gnrale des 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 Compagnie Gnrale i.e., Compagnie Gnrale and BorgWarner go up and down completely randomly.

Pair Corralation between Compagnie Gnrale and BorgWarner

Assuming the 90 days horizon Compagnie Gnrale des is expected to generate 1.99 times more return on investment than BorgWarner. However, Compagnie Gnrale is 1.99 times more volatile than BorgWarner. It trades about 0.02 of its potential returns per unit of risk. BorgWarner is currently generating about -0.01 per unit of risk. If you would invest  2,937  in Compagnie Gnrale des on October 7, 2024 and sell it today you would earn a total of  242.00  from holding Compagnie Gnrale des or generate 8.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.28%
Values	Daily Returns

Compagnie Gnrale des  vs.  BorgWarner

Compagnie Gnrale des

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Gnrale des has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental 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

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Compagnie Gnrale and BorgWarner

The main advantage of trading using opposite Compagnie Gnrale and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Gnrale 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 Compagnie Gnrale des 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 Transaction History module to view history of all your transactions and understand their impact on performance.