Correlation Between NEWELL RUBBERMAID and Westinghouse Air

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

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

Diversification Opportunities for NEWELL RUBBERMAID and Westinghouse Air

0.87

Correlation Coefficient

NEWELL RUBBERMAID  Westinghouse Air

Very poor diversification

The 3 months correlation between NEWELL and Westinghouse is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NEWELL RUBBERMAID 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 NEWELL RUBBERMAID 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 NEWELL RUBBERMAID 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 NEWELL RUBBERMAID i.e., NEWELL RUBBERMAID and Westinghouse Air go up and down completely randomly.

Pair Corralation between NEWELL RUBBERMAID and Westinghouse Air

Assuming the 90 days trading horizon NEWELL RUBBERMAID is expected to generate 2.86 times more return on investment than Westinghouse Air. However, NEWELL RUBBERMAID is 2.86 times more volatile than Westinghouse Air Brake. It trades about 0.16 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.14 per unit of risk. If you would invest  652.00  in NEWELL RUBBERMAID on September 23, 2024 and sell it today you would earn a total of  295.00  from holding NEWELL RUBBERMAID or generate 45.25% return on investment over 90 days.

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

NEWELL RUBBERMAID   vs.  Westinghouse Air Brake

NEWELL RUBBERMAID

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEWELL RUBBERMAID are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, NEWELL RUBBERMAID unveiled solid returns over the last few months and may actually be approaching a breakup point.

Westinghouse Air Brake

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NEWELL RUBBERMAID and Westinghouse Air

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