Correlation Between BorgWarner and Bridgestone
Can any of the company-specific risk be diversified away by investing in both BorgWarner and Bridgestone 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 Bridgestone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Bridgestone, you can compare the effects of market volatilities on BorgWarner and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Bridgestone.
Diversification Opportunities for BorgWarner and Bridgestone
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BorgWarner and Bridgestone is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of BorgWarner i.e., BorgWarner and Bridgestone go up and down completely randomly.
Pair Corralation between BorgWarner and Bridgestone
Considering the 90-day investment horizon BorgWarner is expected to under-perform the Bridgestone. But the stock apears to be less risky and, when comparing its historical volatility, BorgWarner is 2.5 times less risky than Bridgestone. The stock trades about -0.02 of its potential returns per unit of risk. The Bridgestone is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,740 in Bridgestone on August 26, 2024 and sell it today you would lose (473.00) from holding Bridgestone or give up 12.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 55.56% |
| Values | Daily Returns |
BorgWarner vs. Bridgestone
Performance |
| Timeline |
| BorgWarner |
| Bridgestone |
BorgWarner and Bridgestone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and Bridgestone
The main advantage of trading using opposite BorgWarner and Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Bridgestone 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 Bridgestone will offset losses from the drop in Bridgestone's long position.| BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation | BorgWarner vs. Commercial Vehicle Group |
| Bridgestone vs. Allison Transmission Holdings | Bridgestone vs. Luminar Technologies | Bridgestone vs. Lear Corporation | Bridgestone vs. BorgWarner |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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