Correlation Between Fast Retailing and BorgWarner
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and BorgWarner, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and BorgWarner.
Diversification Opportunities for Fast Retailing and BorgWarner
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and BorgWarner is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and BorgWarner go up and down completely randomly.
Pair Corralation between Fast Retailing and BorgWarner
Assuming the 90 days horizon Fast Retailing Co is expected to generate 1.3 times more return on investment than BorgWarner. However, Fast Retailing is 1.3 times more volatile than BorgWarner. It trades about 0.07 of its potential returns per unit of risk. BorgWarner is currently generating about 0.02 per unit of risk. If you would invest 24,795 in Fast Retailing Co on September 3, 2024 and sell it today you would earn a total of 8,795 from holding Fast Retailing Co or generate 35.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 84.21% |
| Values | Daily Returns |
Fast Retailing Co vs. BorgWarner
Performance |
| Timeline |
| Fast Retailing |
| BorgWarner |
Fast Retailing and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and BorgWarner
The main advantage of trading using opposite Fast Retailing and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
| BorgWarner vs. Allison Transmission Holdings | BorgWarner vs. Aptiv PLC | BorgWarner vs. LKQ Corporation | BorgWarner vs. Lear Corporation |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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