Correlation Between Net Lease and Westinghouse Air

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

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

Diversification Opportunities for Net Lease and Westinghouse Air

0.85

Correlation Coefficient

Net Lease  Westinghouse Air

Very poor diversification

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

Pair Corralation between Net Lease and Westinghouse Air

Given the investment horizon of 90 days Net Lease Office is expected to under-perform the Westinghouse Air. In addition to that, Net Lease is 1.13 times more volatile than Westinghouse Air Brake. It trades about -0.29 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about -0.21 per unit of volatility. If you would invest  20,287  in Westinghouse Air Brake on October 11, 2024 and sell it today you would lose (1,160) from holding Westinghouse Air Brake or give up 5.72% of portfolio value over 90 days.

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

Net Lease Office  vs.  Westinghouse Air Brake

Net Lease Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Net Lease Office has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Westinghouse Air Brake

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 2 (%) 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 Net Lease and Westinghouse Air

The main advantage of trading using opposite Net Lease and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Net Lease 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 Net Lease Office 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..