Correlation Between Westinghouse Air and 21036PBN7

Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and 21036PBN7 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 21036PBN7 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 STZ 5 02 FEB 26, you can compare the effects of market volatilities on Westinghouse Air and 21036PBN7 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 21036PBN7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and 21036PBN7.

Diversification Opportunities for Westinghouse Air and 21036PBN7

0.02

Correlation Coefficient

Westinghouse Air  21036PBN7

Significant diversification

The 3 months correlation between Westinghouse and 21036PBN7 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and STZ 5 02 FEB 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 21036PBN7 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 21036PBN7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 21036PBN7 has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and 21036PBN7 go up and down completely randomly.

Pair Corralation between Westinghouse Air and 21036PBN7

Considering the 90-day investment horizon Westinghouse Air Brake is expected to under-perform the 21036PBN7. In addition to that, Westinghouse Air is 9.85 times more volatile than STZ 5 02 FEB 26. It trades about -0.22 of its total potential returns per unit of risk. STZ 5 02 FEB 26 is currently generating about 0.03 per unit of volatility. If you would invest  9,993  in STZ 5 02 FEB 26 on October 5, 2024 and sell it today you would earn a total of  7.00  from holding STZ 5 02 FEB 26 or generate 0.07% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  STZ 5 02 FEB 26

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.

21036PBN7

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STZ 5 02 FEB 26 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 21036PBN7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Westinghouse Air and 21036PBN7

The main advantage of trading using opposite Westinghouse Air and 21036PBN7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, 21036PBN7 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 21036PBN7 will offset losses from the drop in 21036PBN7's long position.

The idea behind Westinghouse Air Brake and STZ 5 02 FEB 26 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.