Correlation Between BorgWarner and PHILIP

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

Diversification Opportunities for BorgWarner and PHILIP

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between BorgWarner and PHILIP is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and PHILIP MORRIS INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHILIP MORRIS INTL 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 PHILIP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHILIP MORRIS INTL has no effect on the direction of BorgWarner i.e., BorgWarner and PHILIP go up and down completely randomly.

Pair Corralation between BorgWarner and PHILIP

Considering the 90-day investment horizon BorgWarner is expected to generate 6.78 times more return on investment than PHILIP. However, BorgWarner is 6.78 times more volatile than PHILIP MORRIS INTL. It trades about 0.01 of its potential returns per unit of risk. PHILIP MORRIS INTL is currently generating about 0.0 per unit of risk. If you would invest  3,441  in BorgWarner on September 14, 2024 and sell it today you would earn a total of  64.00  from holding BorgWarner or generate 1.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy97.57%
ValuesDaily Returns

BorgWarner  vs.  PHILIP MORRIS INTL

 Performance 
       Timeline  
BorgWarner 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BorgWarner may actually be approaching a critical reversion point that can send shares even higher in January 2025.
PHILIP MORRIS INTL 

Risk-Adjusted Performance

0 of 100

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

BorgWarner and PHILIP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BorgWarner and PHILIP

The main advantage of trading using opposite BorgWarner and PHILIP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, PHILIP 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 PHILIP will offset losses from the drop in PHILIP's long position.
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The idea behind BorgWarner and PHILIP MORRIS INTL 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.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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