Correlation Between Materialise and Westinghouse Air

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

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

Diversification Opportunities for Materialise and Westinghouse Air

0.91

Correlation Coefficient

Materialise  Westinghouse Air

Almost no diversification

The 3 months correlation between Materialise and Westinghouse is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake and Materialise 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 Materialise NV are associated (or correlated) with Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of Materialise i.e., Materialise and Westinghouse Air go up and down completely randomly.

Pair Corralation between Materialise and Westinghouse Air

Assuming the 90 days trading horizon Materialise NV is expected to under-perform the Westinghouse Air. In addition to that, Materialise is 2.97 times more volatile than Westinghouse Air Brake. It trades about -0.07 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about -0.12 per unit of volatility. If you would invest  19,175  in Westinghouse Air Brake on October 11, 2024 and sell it today you would lose (525.00) from holding Westinghouse Air Brake or give up 2.74% of portfolio value over 90 days.

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

Materialise NV  vs.  Westinghouse Air Brake

Materialise NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Westinghouse Air Brake

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Materialise and Westinghouse Air

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

The idea behind Materialise NV and Westinghouse Air Brake 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.