Correlation Between Allison Transmission and BorgWarner
Can any of the company-specific risk be diversified away by investing in both Allison Transmission 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 Allison Transmission and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allison Transmission Holdings and BorgWarner, you can compare the effects of market volatilities on Allison Transmission 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 Allison Transmission with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and BorgWarner.
Diversification Opportunities for Allison Transmission and BorgWarner
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Allison and BorgWarner is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Allison Transmission 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 Allison Transmission Holdings 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 Allison Transmission i.e., Allison Transmission and BorgWarner go up and down completely randomly.
Pair Corralation between Allison Transmission and BorgWarner
Given the investment horizon of 90 days Allison Transmission is expected to generate 3.24 times less return on investment than BorgWarner. But when comparing it to its historical volatility, Allison Transmission Holdings is 2.33 times less risky than BorgWarner. It trades about 0.13 of its potential returns per unit of risk. BorgWarner is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,287 in BorgWarner on March 2, 2024 and sell it today you would earn a total of 279.00 from holding BorgWarner or generate 8.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Allison Transmission Holdings vs. BorgWarner
Performance |
Timeline |
Allison Transmission |
BorgWarner |
Allison Transmission and BorgWarner Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Allison Transmission and BorgWarner
The main advantage of trading using opposite Allison Transmission and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission 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.Allison Transmission vs. Motorcar Parts of | Allison Transmission vs. Monro Muffler Brake | Allison Transmission vs. Stoneridge | Allison Transmission vs. Superior Industries International |
BorgWarner vs. Monro Muffler Brake | BorgWarner vs. Standard Motor Products | BorgWarner vs. Douglas Dynamics |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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