Correlation Between Westinghouse Air and Corteva
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Corteva 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 Westinghouse Air and Corteva into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westinghouse Air Brake and Corteva, you can compare the effects of market volatilities on Westinghouse Air and Corteva 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 Westinghouse Air with a short position of Corteva. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Corteva.
Diversification Opportunities for Westinghouse Air and Corteva
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westinghouse and Corteva is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Corteva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corteva and Westinghouse Air 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 Westinghouse Air Brake are associated (or correlated) with Corteva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corteva has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Corteva go up and down completely randomly.
Pair Corralation between Westinghouse Air and Corteva
Assuming the 90 days trading horizon Westinghouse Air Brake is expected to generate 0.63 times more return on investment than Corteva. However, Westinghouse Air Brake is 1.58 times less risky than Corteva. It trades about 0.21 of its potential returns per unit of risk. Corteva is currently generating about 0.11 per unit of risk. If you would invest 27,599 in Westinghouse Air Brake on October 8, 2024 and sell it today you would earn a total of 30,560 from holding Westinghouse Air Brake or generate 110.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 81.47% |
Values | Daily Returns |
Westinghouse Air Brake vs. Corteva
Performance |
Timeline |
Westinghouse Air Brake |
Corteva |
Westinghouse Air and Corteva Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Westinghouse Air and Corteva
The main advantage of trading using opposite Westinghouse Air and Corteva positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Corteva 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 Corteva will offset losses from the drop in Corteva's long position.Westinghouse Air vs. Taiwan Semiconductor Manufacturing | Westinghouse Air vs. Apple Inc | Westinghouse Air vs. Alibaba Group Holding | Westinghouse Air vs. Banco Santander Chile |
Corteva vs. Eastman Chemical | Corteva vs. MAHLE Metal Leve | Corteva vs. United Natural Foods, | Corteva vs. Marfrig Global Foods |
Check out your portfolio center.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.
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