Correlation Between BorgWarner and Valvoline
Can any of the company-specific risk be diversified away by investing in both BorgWarner and Valvoline 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 Valvoline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Valvoline, you can compare the effects of market volatilities on BorgWarner and Valvoline 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 Valvoline. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Valvoline.
Diversification Opportunities for BorgWarner and Valvoline
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BorgWarner and Valvoline is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Valvoline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valvoline 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 Valvoline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valvoline has no effect on the direction of BorgWarner i.e., BorgWarner and Valvoline go up and down completely randomly.
Pair Corralation between BorgWarner and Valvoline
Considering the 90-day investment horizon BorgWarner is expected to generate 1.59 times less return on investment than Valvoline. In addition to that, BorgWarner is 1.11 times more volatile than Valvoline. It trades about 0.02 of its total potential returns per unit of risk. Valvoline is currently generating about 0.04 per unit of volatility. If you would invest 3,505 in Valvoline on September 3, 2024 and sell it today you would earn a total of 439.00 from holding Valvoline or generate 12.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BorgWarner vs. Valvoline
Performance |
| Timeline |
| BorgWarner |
| Valvoline |
BorgWarner and Valvoline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and Valvoline
The main advantage of trading using opposite BorgWarner and Valvoline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Valvoline 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 Valvoline will offset losses from the drop in Valvoline's long position.| BorgWarner vs. Allison Transmission Holdings | BorgWarner vs. Aptiv PLC | BorgWarner vs. LKQ Corporation | BorgWarner vs. Lear Corporation |
| Valvoline vs. Cosan SA ADR | Valvoline vs. Delek Energy | Valvoline vs. Crossamerica Partners LP | Valvoline vs. Par Pacific Holdings |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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