Correlation Between 14575EAA3 and BorgWarner

Can any of the company-specific risk be diversified away by investing in both 14575EAA3 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 14575EAA3 and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US14575EAA38 and BorgWarner, you can compare the effects of market volatilities on 14575EAA3 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 14575EAA3 with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of 14575EAA3 and BorgWarner.

Diversification Opportunities for 14575EAA3 and BorgWarner

0.51

Correlation Coefficient

14575EAA3  BorgWarner

Very weak diversification

The 3 months correlation between 14575EAA3 and BorgWarner is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding US14575EAA38 and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and 14575EAA3 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 US14575EAA38 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 14575EAA3 i.e., 14575EAA3 and BorgWarner go up and down completely randomly.

Pair Corralation between 14575EAA3 and BorgWarner

Assuming the 90 days trading horizon US14575EAA38 is expected to under-perform the BorgWarner. But the bond apears to be less risky and, when comparing its historical volatility, US14575EAA38 is 1.11 times less risky than BorgWarner. The bond trades about -0.31 of its potential returns per unit of risk. The BorgWarner is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,200  in BorgWarner on October 23, 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 Together
Strength	Weak
Accuracy	61.11%
Values	Daily Returns

US14575EAA38  vs.  BorgWarner

US14575EAA38

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US14575EAA38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 14575EAA3 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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 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 14575EAA3 and BorgWarner

The main advantage of trading using opposite 14575EAA3 and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 14575EAA3 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 US14575EAA38 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.