Correlation Between PHLT and BorgWarner

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

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

Diversification Opportunities for PHLT and BorgWarner

0.49

Correlation Coefficient

PHLT  BorgWarner

Very weak diversification

The 3 months correlation between PHLT and BorgWarner is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding PHLT and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and PHLT 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 PHLT 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 PHLT i.e., PHLT and BorgWarner go up and down completely randomly.

Pair Corralation between PHLT and BorgWarner

Given the investment horizon of 90 days PHLT is expected to under-perform the BorgWarner. In addition to that, PHLT is 2.33 times more volatile than BorgWarner. It trades about -0.2 of its total potential returns per unit of risk. BorgWarner is currently generating about -0.27 per unit of volatility. If you would invest  3,461  in BorgWarner on October 11, 2024 and sell it today you would lose (307.00) from holding BorgWarner or give up 8.87% of portfolio value over 90 days.

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

PHLT  vs.  BorgWarner

PHLT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHLT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 PHLT and BorgWarner

The main advantage of trading using opposite PHLT and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHLT 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 PHLT 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.