Correlation Between Westport Fuel and FTAI Infrastructure

Can any of the company-specific risk be diversified away by investing in both Westport Fuel and FTAI Infrastructure 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 Westport Fuel and FTAI Infrastructure into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Westport Fuel Systems and FTAI Infrastructure, you can compare the effects of market volatilities on Westport Fuel and FTAI Infrastructure 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 Westport Fuel with a short position of FTAI Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westport Fuel and FTAI Infrastructure.

Diversification Opportunities for Westport Fuel and FTAI Infrastructure

0.74

Correlation Coefficient

Westport Fuel  FTAI Infrastructure

Poor diversification

The 3 months correlation between Westport and FTAI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Westport Fuel Systems and FTAI Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Infrastructure and Westport Fuel 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 Westport Fuel Systems are associated (or correlated) with FTAI Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Infrastructure has no effect on the direction of Westport Fuel i.e., Westport Fuel and FTAI Infrastructure go up and down completely randomly.

Pair Corralation between Westport Fuel and FTAI Infrastructure

Given the investment horizon of 90 days Westport Fuel Systems is expected to under-perform the FTAI Infrastructure. In addition to that, Westport Fuel is 1.3 times more volatile than FTAI Infrastructure. It trades about -0.39 of its total potential returns per unit of risk. FTAI Infrastructure is currently generating about -0.34 per unit of volatility. If you would invest  875.00  in FTAI Infrastructure on October 3, 2024 and sell it today you would lose (149.00) from holding FTAI Infrastructure or give up 17.03% of portfolio value over 90 days.

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

Westport Fuel Systems  vs.  FTAI Infrastructure

Westport Fuel Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westport Fuel Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

FTAI Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTAI Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Westport Fuel and FTAI Infrastructure

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

The idea behind Westport Fuel Systems and FTAI Infrastructure 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.