Correlation Between Westinghouse Air and ATT

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

Diversification Opportunities for Westinghouse Air and ATT

0.92

Correlation Coefficient

Westinghouse Air  ATT

Almost no diversification

The 3 months correlation between Westinghouse and ATT is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and ATT go up and down completely randomly.

Pair Corralation between Westinghouse Air and ATT

Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 1.17 times more return on investment than ATT. However, Westinghouse Air is 1.17 times more volatile than ATT Inc. It trades about 0.27 of its potential returns per unit of risk. ATT Inc is currently generating about 0.21 per unit of risk. If you would invest  15,309  in Westinghouse Air Brake on September 13, 2024 and sell it today you would earn a total of  3,866  from holding Westinghouse Air Brake or generate 25.25% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  ATT Inc

Westinghouse Air Brake

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 21 (%) 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.

ATT Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ATT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and ATT

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

The idea behind Westinghouse Air Brake and ATT 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.