Correlation Between Gentex and BorgWarner

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

Diversification Opportunities for Gentex and BorgWarner

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Gentex and BorgWarner is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Gentex 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 Gentex 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 Gentex i.e., Gentex and BorgWarner go up and down completely randomly.

Pair Corralation between Gentex and BorgWarner

Given the investment horizon of 90 days Gentex is expected to generate 0.77 times more return on investment than BorgWarner. However, Gentex is 1.3 times less risky than BorgWarner. It trades about 0.04 of its potential returns per unit of risk. BorgWarner is currently generating about 0.02 per unit of risk. If you would invest  2,692  in Gentex on December 30, 2023 and sell it today you would earn a total of  920.00  from holding Gentex or generate 34.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Gentex  vs.  BorgWarner

 Performance 
       Timeline  
Gentex 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Gentex may actually be approaching a critical reversion point that can send shares even higher in April 2024.
BorgWarner 

Risk-Adjusted Performance

0 of 100

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

Gentex and BorgWarner Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gentex and BorgWarner

The main advantage of trading using opposite Gentex and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex 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 Gentex 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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