Correlation Between SASOL and BorgWarner

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Can any of the company-specific risk be diversified away by investing in both SASOL 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 SASOL and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SASOL 4375 18 SEP 26 and BorgWarner, you can compare the effects of market volatilities on SASOL 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 SASOL with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of SASOL and BorgWarner.

Diversification Opportunities for SASOL and BorgWarner

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between SASOL and BorgWarner is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SASOL 4375 18 SEP 26 and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and SASOL 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 SASOL 4375 18 SEP 26 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 SASOL i.e., SASOL and BorgWarner go up and down completely randomly.

Pair Corralation between SASOL and BorgWarner

Assuming the 90 days trading horizon SASOL 4375 18 SEP 26 is expected to under-perform the BorgWarner. But the bond apears to be less risky and, when comparing its historical volatility, SASOL 4375 18 SEP 26 is 6.0 times less risky than BorgWarner. The bond trades about -0.22 of its potential returns per unit of risk. The BorgWarner is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,345  in BorgWarner on September 3, 2024 and sell it today you would earn a total of  87.00  from holding BorgWarner or generate 2.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy60.0%
ValuesDaily Returns

SASOL 4375 18 SEP 26  vs.  BorgWarner

 Performance 
       Timeline  
SASOL 4375 18 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SASOL 4375 18 SEP 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SASOL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
BorgWarner 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BorgWarner is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

SASOL and BorgWarner Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SASOL and BorgWarner

The main advantage of trading using opposite SASOL and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SASOL 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.
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The idea behind SASOL 4375 18 SEP 26 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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