Correlation Between BorgWarner and Ivanhoe Electric

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

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

Diversification Opportunities for BorgWarner and Ivanhoe Electric

0.58

Correlation Coefficient

BorgWarner  Ivanhoe Electric

Very weak diversification

The 3 months correlation between BorgWarner and Ivanhoe is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Ivanhoe Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Electric 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 Ivanhoe Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Electric has no effect on the direction of BorgWarner i.e., BorgWarner and Ivanhoe Electric go up and down completely randomly.

Pair Corralation between BorgWarner and Ivanhoe Electric

Considering the 90-day investment horizon BorgWarner is expected to generate 0.39 times more return on investment than Ivanhoe Electric. However, BorgWarner is 2.58 times less risky than Ivanhoe Electric. It trades about -0.27 of its potential returns per unit of risk. Ivanhoe Electric is currently generating about -0.21 per unit of risk. If you would invest  3,461  in BorgWarner on October 11, 2024 and sell it today you would lose (307.00) from holding BorgWarner or give up 8.87% of portfolio value over 90 days.

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

BorgWarner  vs.  Ivanhoe Electric

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 weak 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.

Ivanhoe Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivanhoe Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with BorgWarner and Ivanhoe Electric

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

The idea behind BorgWarner and Ivanhoe Electric 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.