Correlation Between Westinghouse Air and Molson Coors

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

Diversification Opportunities for Westinghouse Air and Molson Coors

0.82

Correlation Coefficient

Westinghouse Air  Molson Coors

Very poor diversification

The 3 months correlation between Westinghouse and Molson is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Molson Coors Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Brewing 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Brewing has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Molson Coors go up and down completely randomly.

Pair Corralation between Westinghouse Air and Molson Coors

Considering the 90-day investment horizon Westinghouse Air Brake is expected to generate 0.88 times more return on investment than Molson Coors. However, Westinghouse Air Brake is 1.13 times less risky than Molson Coors. It trades about 0.16 of its potential returns per unit of risk. Molson Coors Brewing is currently generating about 0.02 per unit of risk. If you would invest  16,396  in Westinghouse Air Brake on October 3, 2024 and sell it today you would earn a total of  2,563  from holding Westinghouse Air Brake or generate 15.63% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  Molson Coors Brewing

Westinghouse Air Brake

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 5 (%) 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.

Molson Coors Brewing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Molson Coors is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Westinghouse Air and Molson Coors

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

The idea behind Westinghouse Air Brake and Molson Coors Brewing 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.