Correlation Between Westinghouse Air and Pinterest

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

Diversification Opportunities for Westinghouse Air and Pinterest

-0.31

Correlation Coefficient

Westinghouse Air  Pinterest

Very good diversification

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

Pair Corralation between Westinghouse Air and Pinterest

Considering the 90-day investment horizon Westinghouse Air Brake is expected to under-perform the Pinterest. But the stock apears to be less risky and, when comparing its historical volatility, Westinghouse Air Brake is 1.66 times less risky than Pinterest. The stock trades about -0.08 of its potential returns per unit of risk. The Pinterest is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,923  in Pinterest on September 21, 2024 and sell it today you would earn a total of  38.00  from holding Pinterest or generate 1.3% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  Pinterest

Westinghouse Air Brake

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Pinterest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinterest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Westinghouse Air and Pinterest

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

The idea behind Westinghouse Air Brake and Pinterest 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 Transaction History module to view history of all your transactions and understand their impact on performance.