Correlation Between Westinghouse Air and Jiangsu Expressway

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

Diversification Opportunities for Westinghouse Air and Jiangsu Expressway

-0.32

Correlation Coefficient

Westinghouse Air  Jiangsu Expressway

Very good diversification

The 3 months correlation between Westinghouse and Jiangsu is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Jiangsu Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway 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 Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between Westinghouse Air and Jiangsu Expressway

Assuming the 90 days horizon Westinghouse Air Brake is expected to under-perform the Jiangsu Expressway. In addition to that, Westinghouse Air is 1.14 times more volatile than Jiangsu Expressway. It trades about -0.05 of its total potential returns per unit of risk. Jiangsu Expressway is currently generating about -0.01 per unit of volatility. If you would invest  104.00  in Jiangsu Expressway on December 24, 2024 and sell it today you would lose (2.00) from holding Jiangsu Expressway or give up 1.92% of portfolio value over 90 days.

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

Westinghouse Air Brake  vs.  Jiangsu Expressway

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 fragile 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.

Jiangsu Expressway

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Expressway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Jiangsu Expressway is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Westinghouse Air and Jiangsu Expressway

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

The idea behind Westinghouse Air Brake and Jiangsu Expressway 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.