Correlation Between Westinghouse Air and Antofagasta Plc

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

Diversification Opportunities for Westinghouse Air and Antofagasta Plc

-0.77

Correlation Coefficient

Westinghouse Air  Antofagasta Plc

Pay attention - limited upside

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

Pair Corralation between Westinghouse Air and Antofagasta Plc

Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 0.7 times more return on investment than Antofagasta Plc. However, Westinghouse Air Brake is 1.43 times less risky than Antofagasta Plc. It trades about 0.13 of its potential returns per unit of risk. Antofagasta plc is currently generating about 0.02 per unit of risk. If you would invest  11,553  in Westinghouse Air Brake on October 9, 2024 and sell it today you would earn a total of  7,047  from holding Westinghouse Air Brake or generate 61.0% 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.  Antofagasta plc

Westinghouse Air Brake

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 11 (%) 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.

Antofagasta plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antofagasta plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Westinghouse Air and Antofagasta Plc

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

The idea behind Westinghouse Air Brake and Antofagasta 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.