Correlation Between Westinghouse Air and Food Life
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Food Life 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 Food Life 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 Food Life Companies, you can compare the effects of market volatilities on Westinghouse Air and Food Life 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 Food Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Food Life.
Diversification Opportunities for Westinghouse Air and Food Life
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westinghouse and Food is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies 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 Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Food Life go up and down completely randomly.
Pair Corralation between Westinghouse Air and Food Life
Assuming the 90 days horizon Westinghouse Air Brake is expected to under-perform the Food Life. But the stock apears to be less risky and, when comparing its historical volatility, Westinghouse Air Brake is 1.51 times less risky than Food Life. The stock trades about -0.03 of its potential returns per unit of risk. The Food Life Companies is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,000 in Food Life Companies on December 30, 2024 and sell it today you would earn a total of 780.00 from holding Food Life Companies or generate 39.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Westinghouse Air Brake vs. Food Life Companies
Performance |
Timeline |
Westinghouse Air Brake |
Food Life Companies |
Westinghouse Air and Food Life Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Westinghouse Air and Food Life
The main advantage of trading using opposite Westinghouse Air and Food Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Food Life 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 Food Life will offset losses from the drop in Food Life's long position.Westinghouse Air vs. SPECTRAL MEDICAL | Westinghouse Air vs. BII Railway Transportation | Westinghouse Air vs. NAGOYA RAILROAD | Westinghouse Air vs. Merit Medical Systems |
Food Life vs. Kingdee International Software | Food Life vs. PLAYWAY SA ZY 10 | Food Life vs. FARO Technologies | Food Life vs. LG Display Co |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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