Correlation Between BorgWarner and Hesai Group

Can any of the company-specific risk be diversified away by investing in both BorgWarner and Hesai Group 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 BorgWarner and Hesai Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BorgWarner and Hesai Group American, you can compare the effects of market volatilities on BorgWarner and Hesai Group 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 BorgWarner with a short position of Hesai Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Hesai Group.

Diversification Opportunities for BorgWarner and Hesai Group

0.65

Correlation Coefficient

BorgWarner  Hesai Group

Poor diversification

The 3 months correlation between BorgWarner and Hesai is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Hesai Group American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hesai Group American and BorgWarner 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 BorgWarner are associated (or correlated) with Hesai Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hesai Group American has no effect on the direction of BorgWarner i.e., BorgWarner and Hesai Group go up and down completely randomly.

Pair Corralation between BorgWarner and Hesai Group

Considering the 90-day investment horizon BorgWarner is expected to generate 1.72 times less return on investment than Hesai Group. But when comparing it to its historical volatility, BorgWarner is 3.5 times less risky than Hesai Group. It trades about 0.21 of its potential returns per unit of risk. Hesai Group American is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  393.00  in Hesai Group American on February 16, 2024 and sell it today you would earn a total of  122.00  from holding Hesai Group American or generate 31.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BorgWarner  vs.  Hesai Group American

BorgWarner

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BorgWarner sustained solid returns over the last few months and may actually be approaching a breakup point.

Hesai Group American

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hesai Group American are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Hesai Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BorgWarner and Hesai Group

The main advantage of trading using opposite BorgWarner and Hesai Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner position performs unexpectedly, Hesai Group 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 Hesai Group will offset losses from the drop in Hesai Group's long position.

The idea behind BorgWarner and Hesai Group American 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 Transaction History module to view history of all your transactions and understand their impact on performance.