Correlation Between Gap, and Westinghouse Air

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

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

Diversification Opportunities for Gap, and Westinghouse Air

0.75

Correlation Coefficient

Gap,  Westinghouse Air

Poor diversification

The 3 months correlation between Gap, and Westinghouse is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, 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 Gap, 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 The Gap, 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 Gap, i.e., Gap, and Westinghouse Air go up and down completely randomly.

Pair Corralation between Gap, and Westinghouse Air

Considering the 90-day investment horizon The Gap, is expected to under-perform the Westinghouse Air. In addition to that, Gap, is 1.67 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 -0.08 per unit of volatility. If you would invest  19,928  in Westinghouse Air Brake on September 25, 2024 and sell it today you would lose (512.00) from holding Westinghouse Air Brake or give up 2.57% of portfolio value over 90 days.

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

The Gap,  vs.  Westinghouse Air Brake

Gap,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Westinghouse Air Brake

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gap, and Westinghouse Air

The main advantage of trading using opposite Gap, and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.