Correlation Between BorgWarner and Standard
Can any of the company-specific risk be diversified away by investing in both BorgWarner and Standard 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 Standard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Standard Motor Products, you can compare the effects of market volatilities on BorgWarner and Standard 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 Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Standard.
Diversification Opportunities for BorgWarner and Standard
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BorgWarner and Standard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Standard Motor Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Motor Products 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 Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Motor Products has no effect on the direction of BorgWarner i.e., BorgWarner and Standard go up and down completely randomly.
Pair Corralation between BorgWarner and Standard
Considering the 90-day investment horizon BorgWarner is expected to generate 0.78 times more return on investment than Standard. However, BorgWarner is 1.29 times less risky than Standard. It trades about 0.0 of its potential returns per unit of risk. Standard Motor Products is currently generating about -0.03 per unit of risk. If you would invest 3,190 in BorgWarner on November 8, 2024 and sell it today you would lose (73.00) from holding BorgWarner or give up 2.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BorgWarner vs. Standard Motor Products
Performance |
| Timeline |
| BorgWarner |
| Standard Motor Products |
BorgWarner and Standard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and Standard
The main advantage of trading using opposite BorgWarner and Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Standard 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 Standard will offset losses from the drop in Standard's long position.| BorgWarner vs. Lear Corporation | BorgWarner vs. Autoliv | BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation |
| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard vs. Stoneridge |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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