Correlation Between Sable Offshore and Westinghouse Air

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

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

Diversification Opportunities for Sable Offshore and Westinghouse Air

-0.24

Correlation Coefficient

Sable Offshore  Westinghouse Air

Very good diversification

The 3 months correlation between Sable and Westinghouse is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sable Offshore Corp 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 Sable Offshore 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 Sable Offshore Corp 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 Sable Offshore i.e., Sable Offshore and Westinghouse Air go up and down completely randomly.

Pair Corralation between Sable Offshore and Westinghouse Air

Considering the 90-day investment horizon Sable Offshore Corp is expected to generate 4.12 times more return on investment than Westinghouse Air. However, Sable Offshore is 4.12 times more volatile than Westinghouse Air Brake. It trades about 0.0 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about -0.08 per unit of risk. If you would invest  2,302  in Sable Offshore Corp on September 22, 2024 and sell it today you would lose (75.00) from holding Sable Offshore Corp or give up 3.26% of portfolio value over 90 days.

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

Sable Offshore Corp  vs.  Westinghouse Air Brake

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sable Offshore is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Westinghouse Air Brake

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sable Offshore and Westinghouse Air

The main advantage of trading using opposite Sable Offshore and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sable Offshore 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 Sable Offshore Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.