Correlation Between Porvair Plc and Westinghouse Air

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

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

Diversification Opportunities for Porvair Plc and Westinghouse Air

0.48

Correlation Coefficient

Porvair Plc  Westinghouse Air

Very weak diversification

The 3 months correlation between Porvair and Westinghouse is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Porvair plc 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 Porvair Plc 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 Porvair plc 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 Porvair Plc i.e., Porvair Plc and Westinghouse Air go up and down completely randomly.

Pair Corralation between Porvair Plc and Westinghouse Air

Assuming the 90 days horizon Porvair Plc is expected to generate 1.28 times less return on investment than Westinghouse Air. But when comparing it to its historical volatility, Porvair plc is 1.0 times less risky than Westinghouse Air. It trades about 0.12 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  16,396  in Westinghouse Air Brake on October 3, 2024 and sell it today you would earn a total of  2,563  from holding Westinghouse Air Brake or generate 15.63% return on investment over 90 days.

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

Porvair plc  vs.  Westinghouse Air Brake

Porvair plc

Risk-Adjusted Performance

11 of 100

Good

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

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 Porvair Plc and Westinghouse Air

The main advantage of trading using opposite Porvair Plc and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porvair Plc 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 Porvair plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.