Correlation Between Palantir Technologies and Westinghouse Air

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

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

Diversification Opportunities for Palantir Technologies and Westinghouse Air

-0.13

Correlation Coefficient

Palantir Technologies  Westinghouse Air

Good diversification

The 3 months correlation between Palantir and Westinghouse is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies i.e., Palantir Technologies and Westinghouse Air go up and down completely randomly.

Pair Corralation between Palantir Technologies and Westinghouse Air

Assuming the 90 days trading horizon Palantir Technologies is expected to generate 3.13 times more return on investment than Westinghouse Air. However, Palantir Technologies is 3.13 times more volatile than Westinghouse Air Brake. It trades about 0.04 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about -0.09 per unit of risk. If you would invest  16,703  in Palantir Technologies on December 27, 2024 and sell it today you would earn a total of  716.00  from holding Palantir Technologies or generate 4.29% return on investment over 90 days.

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

Palantir Technologies  vs.  Westinghouse Air Brake

Palantir Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Westinghouse Air Brake

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westinghouse Air Brake has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Palantir Technologies and Westinghouse Air

The main advantage of trading using opposite Palantir Technologies and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palantir Technologies 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 Palantir Technologies 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.