Correlation Between Westinghouse Air and Gentex

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

Diversification Opportunities for Westinghouse Air and Gentex

0.8

Correlation Coefficient

Westinghouse Air  Gentex

Very poor diversification

The 3 months correlation between Westinghouse and Gentex is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Gentex go up and down completely randomly.

Pair Corralation between Westinghouse Air and Gentex

Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 0.89 times more return on investment than Gentex. However, Westinghouse Air Brake is 1.12 times less risky than Gentex. It trades about 0.0 of its potential returns per unit of risk. Gentex is currently generating about -0.08 per unit of risk. If you would invest  18,615  in Westinghouse Air Brake on October 7, 2024 and sell it today you would lose (15.00) from holding Westinghouse Air Brake or give up 0.08% 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.  Gentex

Westinghouse Air Brake

Risk-Adjusted Performance

11 of 100

OK

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.

Gentex

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gentex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Westinghouse Air and Gentex

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

The idea behind Westinghouse Air Brake and Gentex 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.