Correlation Between Trinity Industries and Westinghouse Air

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

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

Diversification Opportunities for Trinity Industries and Westinghouse Air

0.9

Correlation Coefficient

Trinity Industries  Westinghouse Air

Almost no diversification

The 3 months correlation between Trinity and Westinghouse is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Industries 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 Trinity Industries 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 Trinity Industries 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 Trinity Industries i.e., Trinity Industries and Westinghouse Air go up and down completely randomly.

Pair Corralation between Trinity Industries and Westinghouse Air

Considering the 90-day investment horizon Trinity Industries is expected to under-perform the Westinghouse Air. In addition to that, Trinity Industries is 1.01 times more volatile than Westinghouse Air Brake. It trades about -0.16 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about -0.03 per unit of volatility. If you would invest  19,070  in Westinghouse Air Brake on December 30, 2024 and sell it today you would lose (891.00) from holding Westinghouse Air Brake or give up 4.67% of portfolio value over 90 days.

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

Trinity Industries  vs.  Westinghouse Air Brake

Trinity Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trinity Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 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 Trinity Industries and Westinghouse Air

The main advantage of trading using opposite Trinity Industries and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Industries 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 Trinity Industries 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..