Correlation Between TRAVEL LEISURE and Westinghouse Air

Can any of the company-specific risk be diversified away by investing in both TRAVEL LEISURE and Westinghouse Air 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 TRAVEL LEISURE and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Westinghouse Air Brake, you can compare the effects of market volatilities on TRAVEL LEISURE and Westinghouse Air 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 TRAVEL LEISURE with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL LEISURE and Westinghouse Air.

Diversification Opportunities for TRAVEL LEISURE and Westinghouse Air

0.96

Correlation Coefficient

TRAVEL LEISURE  Westinghouse Air

Almost no diversification

The 3 months correlation between TRAVEL and Westinghouse is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake and TRAVEL LEISURE 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 TRAVEL LEISURE DL 01 are associated (or correlated) with Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of TRAVEL LEISURE i.e., TRAVEL LEISURE and Westinghouse Air go up and down completely randomly.

Pair Corralation between TRAVEL LEISURE and Westinghouse Air

Assuming the 90 days trading horizon TRAVEL LEISURE is expected to generate 2.72 times less return on investment than Westinghouse Air. But when comparing it to its historical volatility, TRAVEL LEISURE DL 01 is 1.03 times less risky than Westinghouse Air. It trades about 0.04 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  18,410  in Westinghouse Air Brake on September 20, 2024 and sell it today you would earn a total of  550.00  from holding Westinghouse Air Brake or generate 2.99% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Westinghouse Air Brake

TRAVEL LEISURE DL

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

Westinghouse Air Brake

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 16 (%) 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.

Pair Trading with TRAVEL LEISURE and Westinghouse Air

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

The idea behind TRAVEL LEISURE DL 01 and Westinghouse Air Brake 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..