Correlation Between BorgWarner and Continental
Can any of the company-specific risk be diversified away by investing in both BorgWarner and Continental 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 Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Continental AG PK, you can compare the effects of market volatilities on BorgWarner and Continental 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 Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Continental.
Diversification Opportunities for BorgWarner and Continental
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BorgWarner and Continental is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Continental AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental AG PK 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 Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental AG PK has no effect on the direction of BorgWarner i.e., BorgWarner and Continental go up and down completely randomly.
Pair Corralation between BorgWarner and Continental
Considering the 90-day investment horizon BorgWarner is expected to generate 13.14 times less return on investment than Continental. But when comparing it to its historical volatility, BorgWarner is 1.66 times less risky than Continental. It trades about 0.01 of its potential returns per unit of risk. Continental AG PK is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 613.00 in Continental AG PK on August 30, 2024 and sell it today you would earn a total of 37.00 from holding Continental AG PK or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BorgWarner vs. Continental AG PK
Performance |
| Timeline |
| BorgWarner |
| Continental AG PK |
BorgWarner and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and Continental
The main advantage of trading using opposite BorgWarner and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.| BorgWarner vs. Lear Corporation | BorgWarner vs. Autoliv | BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation |
| Continental vs. Compagnie Gnrale des | Continental vs. Bridgestone Corp ADR | Continental vs. Continental Aktiengesellschaft | Continental vs. Douglas Dynamics |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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