Correlation Between Westinghouse Air and Capital Clean

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

Diversification Opportunities for Westinghouse Air and Capital Clean

0.68

Correlation Coefficient

Westinghouse Air  Capital Clean

Poor diversification

The 3 months correlation between Westinghouse and Capital is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Capital Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Clean Energy 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 Capital Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Clean Energy has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Capital Clean go up and down completely randomly.

Pair Corralation between Westinghouse Air and Capital Clean

Considering the 90-day investment horizon Westinghouse Air Brake is expected to generate 0.48 times more return on investment than Capital Clean. However, Westinghouse Air Brake is 2.1 times less risky than Capital Clean. It trades about 0.31 of its potential returns per unit of risk. Capital Clean Energy is currently generating about 0.06 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.  Capital Clean Energy

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.

Capital Clean Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Clean Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Capital Clean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Westinghouse Air and Capital Clean

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

The idea behind Westinghouse Air Brake and Capital Clean Energy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.