Correlation Between Metalrgica Riosulense and Westinghouse Air

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

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

Diversification Opportunities for Metalrgica Riosulense and Westinghouse Air

-0.83

Correlation Coefficient

Metalrgica Riosulense  Westinghouse Air

Pay attention - limited upside

The 3 months correlation between Metalrgica and Westinghouse is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Metalrgica Riosulense SA 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 Metalrgica Riosulense 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 Metalrgica Riosulense SA 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 Metalrgica Riosulense i.e., Metalrgica Riosulense and Westinghouse Air go up and down completely randomly.

Pair Corralation between Metalrgica Riosulense and Westinghouse Air

Assuming the 90 days trading horizon Metalrgica Riosulense is expected to generate 6.77 times less return on investment than Westinghouse Air. In addition to that, Metalrgica Riosulense is 1.63 times more volatile than Westinghouse Air Brake. It trades about 0.01 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.13 per unit of volatility. If you would invest  26,744  in Westinghouse Air Brake on October 25, 2024 and sell it today you would earn a total of  34,702  from holding Westinghouse Air Brake or generate 129.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.79%
Values	Daily Returns

Metalrgica Riosulense SA  vs.  Westinghouse Air Brake

Metalrgica Riosulense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalrgica Riosulense SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Westinghouse Air Brake

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalrgica Riosulense and Westinghouse Air

The main advantage of trading using opposite Metalrgica Riosulense and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalrgica Riosulense 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 Metalrgica Riosulense SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.