Correlation Between BorgWarner and American Axle
Can any of the company-specific risk be diversified away by investing in both BorgWarner and American Axle 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 BorgWarner and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and American Axle Manufacturing, you can compare the effects of market volatilities on BorgWarner and American Axle 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 BorgWarner with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and American Axle.
Diversification Opportunities for BorgWarner and American Axle
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BorgWarner and American is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa and BorgWarner 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 BorgWarner are associated (or correlated) with American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of BorgWarner i.e., BorgWarner and American Axle go up and down completely randomly.
Pair Corralation between BorgWarner and American Axle
Considering the 90-day investment horizon BorgWarner is expected to generate 0.73 times more return on investment than American Axle. However, BorgWarner is 1.36 times less risky than American Axle. It trades about -0.01 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about -0.03 per unit of risk. If you would invest 3,571 in BorgWarner on August 24, 2024 and sell it today you would lose (195.00) from holding BorgWarner or give up 5.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BorgWarner vs. American Axle Manufacturing
Performance |
| Timeline |
| BorgWarner |
| American Axle Manufa |
BorgWarner and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and American Axle
The main advantage of trading using opposite BorgWarner and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, American Axle 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 American Axle will offset losses from the drop in American Axle's long position.| BorgWarner vs. Lear Corporation | BorgWarner vs. Autoliv | BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation |
| American Axle vs. Gentex | American Axle vs. Adient PLC | American Axle vs. Autoliv | American Axle vs. Fox Factory Holding |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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