Correlation Between Westinghouse Air and Aurania Resources

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

Diversification Opportunities for Westinghouse Air and Aurania Resources

0.31

Correlation Coefficient

Westinghouse Air  Aurania Resources

Weak diversification

The 3 months correlation between Westinghouse and Aurania is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Aurania Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurania Resources 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 Aurania Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurania Resources has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Aurania Resources go up and down completely randomly.

Pair Corralation between Westinghouse Air and Aurania Resources

Considering the 90-day investment horizon Westinghouse Air Brake is expected to under-perform the Aurania Resources. But the stock apears to be less risky and, when comparing its historical volatility, Westinghouse Air Brake is 4.17 times less risky than Aurania Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Aurania Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Aurania Resources on December 31, 2024 and sell it today you would lose (4.00) from holding Aurania Resources or give up 13.79% of portfolio value over 90 days.

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

Westinghouse Air Brake  vs.  Aurania Resources

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.

Aurania Resources

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Westinghouse Air and Aurania Resources

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

The idea behind Westinghouse Air Brake and Aurania Resources 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.