Correlation Between Westinghouse Air and PTL

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

Diversification Opportunities for Westinghouse Air and PTL

-0.28

Correlation Coefficient

Westinghouse Air  PTL

Very good diversification

The 3 months correlation between Westinghouse and PTL is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and PTL LTD Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTL LTD Ordinary 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 PTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTL LTD Ordinary has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and PTL go up and down completely randomly.

Pair Corralation between Westinghouse Air and PTL

Considering the 90-day investment horizon Westinghouse Air Brake is expected to under-perform the PTL. But the stock apears to be less risky and, when comparing its historical volatility, Westinghouse Air Brake is 10.8 times less risky than PTL. The stock trades about -0.25 of its potential returns per unit of risk. The PTL LTD Ordinary is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  762.00  in PTL LTD Ordinary on October 10, 2024 and sell it today you would earn a total of  338.00  from holding PTL LTD Ordinary or generate 44.36% 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.  PTL LTD Ordinary

Westinghouse Air Brake

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 3 (%) 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.

PTL LTD Ordinary

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PTL LTD Ordinary are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, PTL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and PTL

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

The idea behind Westinghouse Air Brake and PTL LTD Ordinary 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.