Correlation Between Westinghouse Air and Burlington Stores

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

Diversification Opportunities for Westinghouse Air and Burlington Stores

0.61

Correlation Coefficient

Westinghouse Air  Burlington Stores

Poor diversification

The 3 months correlation between Westinghouse and Burlington is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores 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 Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Burlington Stores go up and down completely randomly.

Pair Corralation between Westinghouse Air and Burlington Stores

Considering the 90-day investment horizon Westinghouse Air Brake is expected to under-perform the Burlington Stores. But the stock apears to be less risky and, when comparing its historical volatility, Westinghouse Air Brake is 1.13 times less risky than Burlington Stores. The stock trades about -0.08 of its potential returns per unit of risk. The Burlington Stores is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  29,166  in Burlington Stores on September 25, 2024 and sell it today you would lose (426.00) from holding Burlington Stores or give up 1.46% of portfolio value over 90 days.

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

Westinghouse Air Brake  vs.  Burlington Stores

Westinghouse Air Brake

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 7 (%) 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.

Burlington Stores

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Burlington Stores is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Westinghouse Air and Burlington Stores

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

The idea behind Westinghouse Air Brake and Burlington Stores 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.