Correlation Between BorgWarner and Ford
Can any of the company-specific risk be diversified away by investing in both BorgWarner and Ford 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 Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Ford Motor, you can compare the effects of market volatilities on BorgWarner and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Ford.
Diversification Opportunities for BorgWarner and Ford
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BorgWarner and Ford is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of BorgWarner i.e., BorgWarner and Ford go up and down completely randomly.
Pair Corralation between BorgWarner and Ford
Considering the 90-day investment horizon BorgWarner is expected to generate 1.03 times more return on investment than Ford. However, BorgWarner is 1.03 times more volatile than Ford Motor. It trades about 0.07 of its potential returns per unit of risk. Ford Motor is currently generating about -0.18 per unit of risk. If you would invest 3,432 in BorgWarner on September 15, 2024 and sell it today you would earn a total of 73.00 from holding BorgWarner or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BorgWarner vs. Ford Motor
Performance |
| Timeline |
| BorgWarner |
| Ford Motor |
BorgWarner and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and Ford
The main advantage of trading using opposite BorgWarner and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.| BorgWarner vs. Ford Motor | BorgWarner vs. General Motors | BorgWarner vs. Goodyear Tire Rubber | BorgWarner vs. Li Auto |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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