Correlation Between Autoliv and BorgWarner

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

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

Diversification Opportunities for Autoliv and BorgWarner

-0.2

Correlation Coefficient

Autoliv  BorgWarner

Good diversification

The 3 months correlation between Autoliv and BorgWarner is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Autoliv 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 Autoliv 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 Autoliv i.e., Autoliv and BorgWarner go up and down completely randomly.

Pair Corralation between Autoliv and BorgWarner

Considering the 90-day investment horizon Autoliv is expected to under-perform the BorgWarner. In addition to that, Autoliv is 1.15 times more volatile than BorgWarner. It trades about -0.01 of its total potential returns per unit of risk. BorgWarner is currently generating about 0.01 per unit of volatility. If you would invest  3,370  in BorgWarner on August 24, 2024 and sell it today you would earn a total of  6.00  from holding BorgWarner or generate 0.18% return on investment over 90 days.

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

Autoliv  vs.  BorgWarner

Autoliv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autoliv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

BorgWarner

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Autoliv and BorgWarner

The main advantage of trading using opposite Autoliv and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv 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 Autoliv 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 CEOs Directory module to screen CEOs from public companies around the world.