Correlation Between Flex and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both Flex 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 Flex and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flex and Westinghouse Air Brake, you can compare the effects of market volatilities on Flex 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 Flex with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flex and Westinghouse Air.
Diversification Opportunities for Flex and Westinghouse Air
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Flex and Westinghouse is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Flex 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 Flex 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 Flex 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 Flex i.e., Flex and Westinghouse Air go up and down completely randomly.
Pair Corralation between Flex and Westinghouse Air
Given the investment horizon of 90 days Flex is expected to generate 4.11 times more return on investment than Westinghouse Air. However, Flex is 4.11 times more volatile than Westinghouse Air Brake. It trades about 0.11 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.18 per unit of risk. If you would invest 1,155 in Flex on September 2, 2024 and sell it today you would earn a total of 2,742 from holding Flex or generate 237.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flex vs. Westinghouse Air Brake
Performance |
| Timeline |
| Flex |
| Westinghouse Air Brake |
Flex and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flex and Westinghouse Air
The main advantage of trading using opposite Flex and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flex 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 Flex 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.| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. CSX Corporation | Westinghouse Air vs. Norfolk Southern |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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