Correlation Between United Guardian and BorgWarner

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

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

Diversification Opportunities for United Guardian and BorgWarner

0.44

Correlation Coefficient

United Guardian  BorgWarner

Very weak diversification

The 3 months correlation between United and BorgWarner is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Guardian and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and United Guardian 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 United Guardian 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 United Guardian i.e., United Guardian and BorgWarner go up and down completely randomly.

Pair Corralation between United Guardian and BorgWarner

Allowing for the 90-day total investment horizon United Guardian is expected to generate 1.62 times more return on investment than BorgWarner. However, United Guardian is 1.62 times more volatile than BorgWarner. It trades about 0.01 of its potential returns per unit of risk. BorgWarner is currently generating about 0.0 per unit of risk. If you would invest  992.00  in United Guardian on September 24, 2024 and sell it today you would lose (24.00) from holding United Guardian or give up 2.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

United Guardian  vs.  BorgWarner

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with United Guardian and BorgWarner

The main advantage of trading using opposite United Guardian and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Guardian 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 United Guardian 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.