Correlation Between Westinghouse Air and BCB Bancorp

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

Diversification Opportunities for Westinghouse Air and BCB Bancorp

0.66

Correlation Coefficient

Westinghouse Air  BCB Bancorp

Poor diversification

The 3 months correlation between Westinghouse and BCB is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and BCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCB Bancorp 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 BCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCB Bancorp has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and BCB Bancorp go up and down completely randomly.

Pair Corralation between Westinghouse Air and BCB Bancorp

Considering the 90-day investment horizon Westinghouse Air Brake is expected to generate 0.48 times more return on investment than BCB Bancorp. However, Westinghouse Air Brake is 2.06 times less risky than BCB Bancorp. It trades about 0.31 of its potential returns per unit of risk. BCB Bancorp is currently generating about 0.1 per unit of risk. If you would invest  16,396  in Westinghouse Air Brake on September 3, 2024 and sell it today you would earn a total of  3,666  from holding Westinghouse Air Brake or generate 22.36% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  BCB Bancorp

Westinghouse Air Brake

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 24 (%) 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.

BCB Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BCB Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, BCB Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and BCB Bancorp

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

The idea behind Westinghouse Air Brake and BCB Bancorp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.