Correlation Between Shui On and Westinghouse Air

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

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

Diversification Opportunities for Shui On and Westinghouse Air

0.37

Correlation Coefficient

Shui On  Westinghouse Air

Weak diversification

The 3 months correlation between Shui and Westinghouse is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shui On Land 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 Shui On 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 Shui On Land 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 Shui On i.e., Shui On and Westinghouse Air go up and down completely randomly.

Pair Corralation between Shui On and Westinghouse Air

Assuming the 90 days horizon Shui On Land is expected to generate 18.37 times more return on investment than Westinghouse Air. However, Shui On is 18.37 times more volatile than Westinghouse Air Brake. It trades about 0.06 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.11 per unit of risk. If you would invest  12.00  in Shui On Land on September 20, 2024 and sell it today you would lose (6.00) from holding Shui On Land or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	30.24%
Values	Daily Returns

Shui On Land  vs.  Westinghouse Air Brake

Shui On Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shui On Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Shui On is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Westinghouse Air Brake

Risk-Adjusted Performance

6 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 6 (%) 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 Shui On and Westinghouse Air

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