Correlation Between Boston Beer and BorgWarner
Can any of the company-specific risk be diversified away by investing in both Boston Beer 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 Boston Beer and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and BorgWarner, you can compare the effects of market volatilities on Boston Beer 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 Boston Beer with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and BorgWarner.
Diversification Opportunities for Boston Beer and BorgWarner
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Boston and BorgWarner is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and BorgWarner go up and down completely randomly.
Pair Corralation between Boston Beer and BorgWarner
Considering the 90-day investment horizon Boston Beer is expected to under-perform the BorgWarner. In addition to that, Boston Beer is 1.38 times more volatile than BorgWarner. It trades about -0.5 of its total potential returns per unit of risk. BorgWarner is currently generating about -0.31 per unit of volatility. If you would invest 3,405 in BorgWarner on October 14, 2024 and sell it today you would lose (301.00) from holding BorgWarner or give up 8.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. BorgWarner
Performance |
| Timeline |
| Boston Beer |
| BorgWarner |
Boston Beer and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and BorgWarner
The main advantage of trading using opposite Boston Beer and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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.| Boston Beer vs. Anheuser Busch Inbev | Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA ADR |
| BorgWarner vs. Lear Corporation | BorgWarner vs. Autoliv | BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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