Correlation Between BorgWarner and Innoviz Technologies

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

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

Diversification Opportunities for BorgWarner and Innoviz Technologies

-0.33

Correlation Coefficient

BorgWarner  Innoviz Technologies

Very good diversification

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

Pair Corralation between BorgWarner and Innoviz Technologies

Considering the 90-day investment horizon BorgWarner is expected to generate 0.47 times more return on investment than Innoviz Technologies. However, BorgWarner is 2.13 times less risky than Innoviz Technologies. It trades about 0.12 of its potential returns per unit of risk. Innoviz Technologies is currently generating about -0.15 per unit of risk. If you would invest  3,443  in BorgWarner on February 4, 2024 and sell it today you would earn a total of  201.00  from holding BorgWarner or generate 5.84% return on investment over 90 days.

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

BorgWarner  vs.  Innoviz Technologies

BorgWarner

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, BorgWarner may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Innoviz Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innoviz Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BorgWarner and Innoviz Technologies

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

The idea behind BorgWarner and Innoviz Technologies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.