Correlation Between MEDICAL FACILITIES and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both MEDICAL FACILITIES 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 MEDICAL FACILITIES and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MEDICAL FACILITIES NEW and Westinghouse Air Brake, you can compare the effects of market volatilities on MEDICAL FACILITIES 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 MEDICAL FACILITIES with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEDICAL FACILITIES and Westinghouse Air.
Diversification Opportunities for MEDICAL FACILITIES and Westinghouse Air
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MEDICAL and Westinghouse is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MEDICAL FACILITIES NEW 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 MEDICAL FACILITIES 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 MEDICAL FACILITIES NEW 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 MEDICAL FACILITIES i.e., MEDICAL FACILITIES and Westinghouse Air go up and down completely randomly.
Pair Corralation between MEDICAL FACILITIES and Westinghouse Air
Assuming the 90 days horizon MEDICAL FACILITIES is expected to generate 1.79 times less return on investment than Westinghouse Air. In addition to that, MEDICAL FACILITIES is 1.77 times more volatile than Westinghouse Air Brake. It trades about 0.13 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.42 per unit of volatility. If you would invest 18,485 in Westinghouse Air Brake on November 3, 2024 and sell it today you would earn a total of 1,725 from holding Westinghouse Air Brake or generate 9.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MEDICAL FACILITIES NEW vs. Westinghouse Air Brake
Performance |
| Timeline |
| MEDICAL FACILITIES NEW |
| Westinghouse Air Brake |
MEDICAL FACILITIES and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MEDICAL FACILITIES and Westinghouse Air
The main advantage of trading using opposite MEDICAL FACILITIES and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEDICAL FACILITIES 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.| MEDICAL FACILITIES vs. Semiconductor Manufacturing International | MEDICAL FACILITIES vs. ELMOS SEMICONDUCTOR | MEDICAL FACILITIES vs. TOREX SEMICONDUCTOR LTD | MEDICAL FACILITIES vs. Universal Health Realty |
| Westinghouse Air vs. SOUTHWEST AIRLINES | Westinghouse Air vs. Southwest Airlines Co | Westinghouse Air vs. TreeHouse Foods | Westinghouse Air vs. SENECA FOODS A |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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