Correlation Between RBACN and BorgWarner

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

By analyzing existing cross correlation between RBACN 775 15 MAR 31 and BorgWarner, you can compare the effects of market volatilities on RBACN 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 RBACN with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBACN and BorgWarner.

Diversification Opportunities for RBACN and BorgWarner

0.74

Correlation Coefficient

RBACN  BorgWarner

Poor diversification

The 3 months correlation between RBACN and BorgWarner is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding RBACN 775 15 MAR 31 and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and RBACN 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 RBACN 775 15 MAR 31 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 RBACN i.e., RBACN and BorgWarner go up and down completely randomly.

Pair Corralation between RBACN and BorgWarner

Assuming the 90 days trading horizon RBACN 775 15 MAR 31 is expected to generate 0.22 times more return on investment than BorgWarner. However, RBACN 775 15 MAR 31 is 4.46 times less risky than BorgWarner. It trades about 0.02 of its potential returns per unit of risk. BorgWarner is currently generating about -0.02 per unit of risk. If you would invest  10,155  in RBACN 775 15 MAR 31 on October 5, 2024 and sell it today you would earn a total of  308.00  from holding RBACN 775 15 MAR 31 or generate 3.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.19%
Values	Daily Returns

RBACN 775 15 MAR 31  vs.  BorgWarner

RBACN 775 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBACN 775 15 MAR 31 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RBACN is not utilizing all of its potentials. The current 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 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 RBACN and BorgWarner

The main advantage of trading using opposite RBACN and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBACN 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 RBACN 775 15 MAR 31 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.