Correlation Between Westinghouse Air and Alphabet

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

Diversification Opportunities for Westinghouse Air and Alphabet

0.77

Correlation Coefficient

Westinghouse Air  Alphabet

Poor diversification

The 3 months correlation between Westinghouse and Alphabet is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Alphabet go up and down completely randomly.

Pair Corralation between Westinghouse Air and Alphabet

Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 0.88 times more return on investment than Alphabet. However, Westinghouse Air Brake is 1.14 times less risky than Alphabet. It trades about 0.12 of its potential returns per unit of risk. Alphabet Class A is currently generating about 0.08 per unit of risk. If you would invest  10,387  in Westinghouse Air Brake on September 28, 2024 and sell it today you would earn a total of  8,063  from holding Westinghouse Air Brake or generate 77.63% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  Alphabet Class A

Westinghouse Air Brake

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Westinghouse Air reported solid returns over the last few months and may actually be approaching a breakup point.

Alphabet Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and Alphabet

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

The idea behind Westinghouse Air Brake and Alphabet Class A 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..