Correlation Between BorgWarner and Canlan Ice

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

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

Diversification Opportunities for BorgWarner and Canlan Ice

0.54

Correlation Coefficient

BorgWarner  Canlan Ice

Very weak diversification

The 3 months correlation between BorgWarner and Canlan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports 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 Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of BorgWarner i.e., BorgWarner and Canlan Ice go up and down completely randomly.

Pair Corralation between BorgWarner and Canlan Ice

Considering the 90-day investment horizon BorgWarner is expected to generate 11.32 times more return on investment than Canlan Ice. However, BorgWarner is 11.32 times more volatile than Canlan Ice Sports. It trades about 0.04 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.17 per unit of risk. If you would invest  3,309  in BorgWarner on September 3, 2024 and sell it today you would earn a total of  123.00  from holding BorgWarner or generate 3.72% return on investment over 90 days.

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

BorgWarner  vs.  Canlan Ice Sports

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Canlan Ice Sports

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BorgWarner and Canlan Ice

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

The idea behind BorgWarner and Canlan Ice Sports 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.