Correlation Between International Consolidated and BorgWarner

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

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

Diversification Opportunities for International Consolidated and BorgWarner

-0.2

Correlation Coefficient

International Consolidated  BorgWarner

Good diversification

The 3 months correlation between International and BorgWarner is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and BorgWarner go up and down completely randomly.

Pair Corralation between International Consolidated and BorgWarner

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.37 times more return on investment than BorgWarner. However, International Consolidated is 1.37 times more volatile than BorgWarner. It trades about -0.02 of its potential returns per unit of risk. BorgWarner is currently generating about -0.07 per unit of risk. If you would invest  765.00  in International Consolidated Airlines on December 24, 2024 and sell it today you would lose (33.00) from holding International Consolidated Airlines or give up 4.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

International Consolidated Air  vs.  BorgWarner

International Consolidated

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Consolidated Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, International Consolidated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BorgWarner

Risk-Adjusted Performance

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.

Pair Trading with International Consolidated and BorgWarner

The main advantage of trading using opposite International Consolidated and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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 International Consolidated Airlines 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.