Correlation Between 512807AV0 and Westinghouse Air

Can any of the company-specific risk be diversified away by investing in both 512807AV0 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 512807AV0 and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LAM RESEARCH PORATION and Westinghouse Air Brake, you can compare the effects of market volatilities on 512807AV0 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 512807AV0 with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of 512807AV0 and Westinghouse Air.

Diversification Opportunities for 512807AV0 and Westinghouse Air

-0.56

Correlation Coefficient

512807AV0  Westinghouse Air

Excellent diversification

The 3 months correlation between 512807AV0 and Westinghouse is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding LAM RESEARCH PORATION 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 512807AV0 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 LAM RESEARCH PORATION 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 512807AV0 i.e., 512807AV0 and Westinghouse Air go up and down completely randomly.

Pair Corralation between 512807AV0 and Westinghouse Air

Assuming the 90 days trading horizon LAM RESEARCH PORATION is expected to under-perform the Westinghouse Air. But the bond apears to be less risky and, when comparing its historical volatility, LAM RESEARCH PORATION is 3.28 times less risky than Westinghouse Air. The bond trades about -0.04 of its potential returns per unit of risk. The Westinghouse Air Brake is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  16,011  in Westinghouse Air Brake on September 23, 2024 and sell it today you would earn a total of  3,292  from holding Westinghouse Air Brake or generate 20.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.06%
Values	Daily Returns

LAM RESEARCH PORATION  vs.  Westinghouse Air Brake

LAM RESEARCH PORATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAM RESEARCH PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for LAM RESEARCH PORATION investors.

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 512807AV0 and Westinghouse Air

The main advantage of trading using opposite 512807AV0 and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 512807AV0 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 LAM RESEARCH PORATION 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.