Correlation Between Continental Aktiengesellscha and BorgWarner
Can any of the company-specific risk be diversified away by investing in both Continental Aktiengesellscha and BorgWarner 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 Continental Aktiengesellscha and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Continental Aktiengesellschaft and BorgWarner, you can compare the effects of market volatilities on Continental Aktiengesellscha and BorgWarner 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 Continental Aktiengesellscha with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Aktiengesellscha and BorgWarner.
Diversification Opportunities for Continental Aktiengesellscha and BorgWarner
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Continental and BorgWarner is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Continental Aktiengesellschaft and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Continental Aktiengesellscha 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 Continental Aktiengesellschaft are associated (or correlated) with BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Continental Aktiengesellscha i.e., Continental Aktiengesellscha and BorgWarner go up and down completely randomly.
Pair Corralation between Continental Aktiengesellscha and BorgWarner
Assuming the 90 days horizon Continental Aktiengesellschaft is expected to generate 2.41 times more return on investment than BorgWarner. However, Continental Aktiengesellscha is 2.41 times more volatile than BorgWarner. It trades about 0.05 of its potential returns per unit of risk. BorgWarner is currently generating about -0.08 per unit of risk. If you would invest 6,277 in Continental Aktiengesellschaft on August 30, 2024 and sell it today you would earn a total of 343.00 from holding Continental Aktiengesellschaft or generate 5.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Continental Aktiengesellschaft vs. BorgWarner
Performance |
| Timeline |
| Continental Aktiengesellscha |
| BorgWarner |
Continental Aktiengesellscha and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Continental Aktiengesellscha and BorgWarner
The main advantage of trading using opposite Continental Aktiengesellscha and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental Aktiengesellscha position performs unexpectedly, BorgWarner 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 BorgWarner will offset losses from the drop in BorgWarner's long position.The idea behind Continental Aktiengesellschaft and BorgWarner 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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