Correlation Between Westinghouse Air and Palantir Technologies

Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies, you can compare the effects of market volatilities on Westinghouse Air and Palantir Technologies 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 Palantir Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Palantir Technologies.

Diversification Opportunities for Westinghouse Air and Palantir Technologies

0.88

Correlation Coefficient

Westinghouse Air  Palantir Technologies

Very poor diversification

The 3 months correlation between Westinghouse and Palantir is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Palantir Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Technologies 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 Palantir Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir Technologies has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Palantir Technologies go up and down completely randomly.

Pair Corralation between Westinghouse Air and Palantir Technologies

Assuming the 90 days trading horizon Westinghouse Air is expected to generate 5.21 times less return on investment than Palantir Technologies. But when comparing it to its historical volatility, Westinghouse Air Brake is 3.37 times less risky than Palantir Technologies. It trades about 0.16 of its potential returns per unit of risk. Palantir Technologies is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,594  in Palantir Technologies on October 26, 2024 and sell it today you would earn a total of  6,946  from holding Palantir Technologies or generate 80.82% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  Palantir Technologies

Westinghouse Air Brake

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Palantir Technologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and Palantir Technologies

The main advantage of trading using opposite Westinghouse Air and Palantir Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Palantir Technologies 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 Palantir Technologies will offset losses from the drop in Palantir Technologies' long position.

The idea behind Westinghouse Air Brake and Palantir Technologies 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 CEOs Directory module to screen CEOs from public companies around the world.