Correlation Between BorgWarner and Rivian Automotive

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

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

Diversification Opportunities for BorgWarner and Rivian Automotive

-0.56

Correlation Coefficient

BorgWarner  Rivian Automotive

Excellent diversification

The 3 months correlation between BorgWarner and Rivian is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive 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 Rivian Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivian Automotive has no effect on the direction of BorgWarner i.e., BorgWarner and Rivian Automotive go up and down completely randomly.

Pair Corralation between BorgWarner and Rivian Automotive

Considering the 90-day investment horizon BorgWarner is expected to generate 0.4 times more return on investment than Rivian Automotive. However, BorgWarner is 2.53 times less risky than Rivian Automotive. It trades about 0.02 of its potential returns per unit of risk. Rivian Automotive is currently generating about -0.03 per unit of risk. If you would invest  3,396  in BorgWarner on August 30, 2024 and sell it today you would earn a total of  32.00  from holding BorgWarner or generate 0.94% return on investment over 90 days.

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

BorgWarner  vs.  Rivian Automotive

BorgWarner

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Rivian Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rivian Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with BorgWarner and Rivian Automotive

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

The idea behind BorgWarner and Rivian Automotive 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.