Correlation Between BorgWarner and Willamette Valley

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

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

Diversification Opportunities for BorgWarner and Willamette Valley

-0.33

Correlation Coefficient

BorgWarner  Willamette Valley

Very good diversification

The 3 months correlation between BorgWarner and Willamette is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of BorgWarner i.e., BorgWarner and Willamette Valley go up and down completely randomly.

Pair Corralation between BorgWarner and Willamette Valley

Considering the 90-day investment horizon BorgWarner is expected to generate 1.0 times more return on investment than Willamette Valley. However, BorgWarner is 1.0 times less risky than Willamette Valley. It trades about 0.04 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.08 per unit of risk. If you would invest  3,307  in BorgWarner on September 4, 2024 and sell it today you would earn a total of  125.00  from holding BorgWarner or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

BorgWarner  vs.  Willamette Valley Vineyards

BorgWarner

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 3 (%) 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.

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with BorgWarner and Willamette Valley

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

The idea behind BorgWarner and Willamette Valley Vineyards 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.