Correlation Between Westinghouse Air and Amazon

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

Diversification Opportunities for Westinghouse Air and Amazon

0.84

Correlation Coefficient

Westinghouse Air  Amazon

Very poor diversification

The 3 months correlation between Westinghouse and Amazon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Amazon go up and down completely randomly.

Pair Corralation between Westinghouse Air and Amazon

Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 1.01 times more return on investment than Amazon. However, Westinghouse Air is 1.01 times more volatile than Amazon Inc. It trades about -0.05 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.1 per unit of risk. If you would invest  18,316  in Westinghouse Air Brake on December 25, 2024 and sell it today you would lose (1,326) from holding Westinghouse Air Brake or give up 7.24% of portfolio value over 90 days.

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

Westinghouse Air Brake  vs.  Amazon Inc

Westinghouse Air Brake

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westinghouse Air Brake has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Westinghouse Air and Amazon

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

The idea behind Westinghouse Air Brake and Amazon Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.