Correlation Between BCE and BorgWarner
Can any of the company-specific risk be diversified away by investing in both BCE 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 BCE and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and BorgWarner, you can compare the effects of market volatilities on BCE 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 BCE with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and BorgWarner.
Diversification Opportunities for BCE and BorgWarner
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between BCE and BorgWarner is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and BCE 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 BCE Inc 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 BCE i.e., BCE and BorgWarner go up and down completely randomly.
Pair Corralation between BCE and BorgWarner
Considering the 90-day investment horizon BCE Inc is expected to under-perform the BorgWarner. In addition to that, BCE is 1.25 times more volatile than BorgWarner. It trades about -0.37 of its total potential returns per unit of risk. BorgWarner is currently generating about 0.06 per unit of volatility. If you would invest 3,363 in BorgWarner on September 1, 2024 and sell it today you would earn a total of 69.00 from holding BorgWarner or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. BorgWarner
Performance |
| Timeline |
| BCE Inc |
| BorgWarner |
BCE and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and BorgWarner
The main advantage of trading using opposite BCE and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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 BCE Inc 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.| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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