Correlation Between DENSO and BorgWarner
Can any of the company-specific risk be diversified away by investing in both DENSO 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 DENSO and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DENSO and BorgWarner, you can compare the effects of market volatilities on DENSO 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 DENSO with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO and BorgWarner.
Diversification Opportunities for DENSO and BorgWarner
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between DENSO and BorgWarner is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding DENSO and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and DENSO 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 DENSO 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 DENSO i.e., DENSO and BorgWarner go up and down completely randomly.
Pair Corralation between DENSO and BorgWarner
Assuming the 90 days horizon DENSO is expected to generate 40.71 times more return on investment than BorgWarner. However, DENSO is 40.71 times more volatile than BorgWarner. It trades about 0.17 of its potential returns per unit of risk. BorgWarner is currently generating about 0.0 per unit of risk. If you would invest 5,441 in DENSO on August 26, 2024 and sell it today you would lose (3,956) from holding DENSO or give up 72.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.56% |
| Values | Daily Returns |
DENSO vs. BorgWarner
Performance |
| Timeline |
| DENSO |
| BorgWarner |
DENSO and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DENSO and BorgWarner
The main advantage of trading using opposite DENSO and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DENSO 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.| DENSO vs. Bridgestone Corp ADR | DENSO vs. American Axle Manufacturing | DENSO vs. Dana Inc | DENSO vs. Aeva Technologies |
| BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation | BorgWarner vs. Commercial Vehicle Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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