Correlation Between BorgWarner and Cars
Can any of the company-specific risk be diversified away by investing in both BorgWarner and Cars 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 Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Cars Inc, you can compare the effects of market volatilities on BorgWarner and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Cars.
Diversification Opportunities for BorgWarner and Cars
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BorgWarner and Cars is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of BorgWarner i.e., BorgWarner and Cars go up and down completely randomly.
Pair Corralation between BorgWarner and Cars
Considering the 90-day investment horizon BorgWarner is expected to generate 11.77 times less return on investment than Cars. But when comparing it to its historical volatility, BorgWarner is 1.2 times less risky than Cars. It trades about 0.0 of its potential returns per unit of risk. Cars Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,453 in Cars Inc on August 28, 2024 and sell it today you would earn a total of 536.00 from holding Cars Inc or generate 36.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BorgWarner vs. Cars Inc
Performance |
| Timeline |
| BorgWarner |
| Cars Inc |
BorgWarner and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and Cars
The main advantage of trading using opposite BorgWarner and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.The idea behind BorgWarner and Cars Inc 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.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |