Correlation Between Westinghouse Air and Entain Plc

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

Diversification Opportunities for Westinghouse Air and Entain Plc

0.15

Correlation Coefficient

Westinghouse Air  Entain Plc

Average diversification

The 3 months correlation between Westinghouse and Entain is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Entain Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entain Plc 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 Entain Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entain Plc has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Entain Plc go up and down completely randomly.

Pair Corralation between Westinghouse Air and Entain Plc

Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 0.5 times more return on investment than Entain Plc. However, Westinghouse Air Brake is 2.02 times less risky than Entain Plc. It trades about 0.17 of its potential returns per unit of risk. Entain Plc is currently generating about -0.01 per unit of risk. If you would invest  17,262  in Westinghouse Air Brake on October 24, 2024 and sell it today you would earn a total of  2,603  from holding Westinghouse Air Brake or generate 15.08% 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.  Entain Plc

Westinghouse Air Brake

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Westinghouse Air reported solid returns over the last few months and may actually be approaching a breakup point.

Entain Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entain Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Entain Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Westinghouse Air and Entain Plc

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

The idea behind Westinghouse Air Brake and Entain Plc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.