Correlation Between Fair Isaac and Westinghouse Air

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

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

Diversification Opportunities for Fair Isaac and Westinghouse Air

0.85

Correlation Coefficient

Fair Isaac  Westinghouse Air

Very poor diversification

The 3 months correlation between Fair and Westinghouse is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac 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 Fair Isaac 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 Fair Isaac 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 Fair Isaac i.e., Fair Isaac and Westinghouse Air go up and down completely randomly.

Pair Corralation between Fair Isaac and Westinghouse Air

Given the investment horizon of 90 days Fair Isaac is expected to generate 1.36 times more return on investment than Westinghouse Air. However, Fair Isaac is 1.36 times more volatile than Westinghouse Air Brake. It trades about 0.14 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.1 per unit of risk. If you would invest  62,788  in Fair Isaac on October 8, 2024 and sell it today you would earn a total of  133,838  from holding Fair Isaac or generate 213.16% return on investment over 90 days.

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

Fair Isaac  vs.  Westinghouse Air Brake

Fair Isaac

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Fair Isaac has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Fair Isaac is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Westinghouse Air Brake

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Westinghouse Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fair Isaac and Westinghouse Air

The main advantage of trading using opposite Fair Isaac and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Isaac 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 Fair Isaac 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.