Correlation Between AutoZone and BorgWarner

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

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

Diversification Opportunities for AutoZone and BorgWarner

0.13

Correlation Coefficient

AutoZone  BorgWarner

Average diversification

The 3 months correlation between AutoZone and BorgWarner is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and AutoZone 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 AutoZone 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 AutoZone i.e., AutoZone and BorgWarner go up and down completely randomly.

Pair Corralation between AutoZone and BorgWarner

Considering the 90-day investment horizon AutoZone is expected to generate 3.85 times less return on investment than BorgWarner. But when comparing it to its historical volatility, AutoZone is 1.17 times less risky than BorgWarner. It trades about 0.07 of its potential returns per unit of risk. BorgWarner is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,018  in BorgWarner on May 7, 2025 and sell it today you would earn a total of  810.00  from holding BorgWarner or generate 26.84% return on investment over 90 days.

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

AutoZone  vs.  BorgWarner

AutoZone

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in September 2025.

BorgWarner

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BorgWarner sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoZone and BorgWarner

The main advantage of trading using opposite AutoZone and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone 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 AutoZone 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.