Correlation Between American Axle and BorgWarner
Can any of the company-specific risk be diversified away by investing in both American Axle 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 American Axle and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Axle Manufacturing and BorgWarner, you can compare the effects of market volatilities on American Axle 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 American Axle with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and BorgWarner.
Diversification Opportunities for American Axle and BorgWarner
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and BorgWarner is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and American Axle 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 American Axle Manufacturing 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 American Axle i.e., American Axle and BorgWarner go up and down completely randomly.
Pair Corralation between American Axle and BorgWarner
Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the BorgWarner. In addition to that, American Axle is 1.43 times more volatile than BorgWarner. It trades about -0.02 of its total potential returns per unit of risk. BorgWarner is currently generating about 0.0 per unit of volatility. If you would invest 3,603 in BorgWarner on August 24, 2024 and sell it today you would lose (227.00) from holding BorgWarner or give up 6.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. BorgWarner
Performance |
| Timeline |
| American Axle Manufa |
| BorgWarner |
American Axle and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and BorgWarner
The main advantage of trading using opposite American Axle and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle 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.| American Axle vs. Gentex | American Axle vs. Adient PLC | American Axle vs. Autoliv | American Axle vs. Fox Factory Holding |
| BorgWarner vs. Lear Corporation | BorgWarner vs. Autoliv | BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation |
Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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