Correlation Between Westinghouse Air and Eurasia Mining

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

Diversification Opportunities for Westinghouse Air and Eurasia Mining

-0.24

Correlation Coefficient

Westinghouse Air  Eurasia Mining

Very good diversification

The 3 months correlation between Westinghouse and Eurasia is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Eurasia Mining Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurasia Mining 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 Eurasia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurasia Mining Plc has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Eurasia Mining go up and down completely randomly.

Pair Corralation between Westinghouse Air and Eurasia Mining

Assuming the 90 days horizon Westinghouse Air Brake is expected to under-perform the Eurasia Mining. But the stock apears to be less risky and, when comparing its historical volatility, Westinghouse Air Brake is 2.2 times less risky than Eurasia Mining. The stock trades about -0.06 of its potential returns per unit of risk. The Eurasia Mining Plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1.80  in Eurasia Mining Plc on December 23, 2024 and sell it today you would earn a total of  0.55  from holding Eurasia Mining Plc or generate 30.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Westinghouse Air Brake  vs.  Eurasia Mining Plc

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 unsteady 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.

Eurasia Mining Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eurasia Mining Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Eurasia Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and Eurasia Mining

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

The idea behind Westinghouse Air Brake and Eurasia Mining 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.