Correlation Between BorgWarner and Macmahon Holdings

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Can any of the company-specific risk be diversified away by investing in both BorgWarner and Macmahon Holdings 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 Macmahon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Macmahon Holdings Limited, you can compare the effects of market volatilities on BorgWarner and Macmahon Holdings 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 Macmahon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Macmahon Holdings.

Diversification Opportunities for BorgWarner and Macmahon Holdings

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between BorgWarner and Macmahon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon Holdings 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 Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of BorgWarner i.e., BorgWarner and Macmahon Holdings go up and down completely randomly.

Pair Corralation between BorgWarner and Macmahon Holdings

Considering the 90-day investment horizon BorgWarner is expected to generate 0.73 times more return on investment than Macmahon Holdings. However, BorgWarner is 1.37 times less risky than Macmahon Holdings. It trades about -0.09 of its potential returns per unit of risk. Macmahon Holdings Limited is currently generating about -0.22 per unit of risk. If you would invest  3,427  in BorgWarner on September 19, 2024 and sell it today you would lose (129.00) from holding BorgWarner or give up 3.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BorgWarner  vs.  Macmahon Holdings Limited

 Performance 
       Timeline  
BorgWarner 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BorgWarner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BorgWarner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Macmahon Holdings 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

BorgWarner and Macmahon Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BorgWarner and Macmahon Holdings

The main advantage of trading using opposite BorgWarner and Macmahon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Macmahon Holdings 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 Macmahon Holdings will offset losses from the drop in Macmahon Holdings' long position.
The idea behind BorgWarner and Macmahon Holdings Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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