Correlation Between BorgWarner and Pure Cycle

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

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

Diversification Opportunities for BorgWarner and Pure Cycle

0.08

Correlation Coefficient

BorgWarner  Pure Cycle

Significant diversification

The 3 months correlation between BorgWarner and Pure is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle 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 Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of BorgWarner i.e., BorgWarner and Pure Cycle go up and down completely randomly.

Pair Corralation between BorgWarner and Pure Cycle

Considering the 90-day investment horizon BorgWarner is expected to under-perform the Pure Cycle. But the stock apears to be less risky and, when comparing its historical volatility, BorgWarner is 1.16 times less risky than Pure Cycle. The stock trades about 0.0 of its potential returns per unit of risk. The Pure Cycle is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,050  in Pure Cycle on October 22, 2024 and sell it today you would earn a total of  105.00  from holding Pure Cycle or generate 10.0% return on investment over 90 days.

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

BorgWarner  vs.  Pure Cycle

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 somewhat strong basic indicators, BorgWarner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pure Cycle

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Cycle are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Pure Cycle may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BorgWarner and Pure Cycle

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

The idea behind BorgWarner and Pure Cycle 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 Global Correlations module to find global opportunities by holding instruments from different markets.