Correlation Between Westinghouse Air and Greenfire Resources

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

Diversification Opportunities for Westinghouse Air and Greenfire Resources

-0.42

Correlation Coefficient

Westinghouse Air  Greenfire Resources

Very good diversification

The 3 months correlation between Westinghouse and Greenfire is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Greenfire Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenfire 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 Greenfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenfire Resources has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Greenfire Resources go up and down completely randomly.

Pair Corralation between Westinghouse Air and Greenfire Resources

Considering the 90-day investment horizon Westinghouse Air Brake is expected to generate 0.52 times more return on investment than Greenfire Resources. However, Westinghouse Air Brake is 1.94 times less risky than Greenfire Resources. It trades about 0.1 of its potential returns per unit of risk. Greenfire Resources is currently generating about -0.15 per unit of risk. If you would invest  18,044  in Westinghouse Air Brake on September 24, 2024 and sell it today you would earn a total of  1,259  from holding Westinghouse Air Brake or generate 6.98% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  Greenfire Resources

Westinghouse Air Brake

Risk-Adjusted Performance

7 of 100

OK

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.

Greenfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greenfire Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Westinghouse Air and Greenfire Resources

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

The idea behind Westinghouse Air Brake and Greenfire 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.