Correlation Between Microsoft and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Westinghouse Air Brake, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Westinghouse Air.
Diversification Opportunities for Microsoft and Westinghouse Air
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Westinghouse is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Westinghouse Air go up and down completely randomly.
Pair Corralation between Microsoft and Westinghouse Air
Given the investment horizon of 90 days Microsoft is expected to generate 2.49 times less return on investment than Westinghouse Air. But when comparing it to its historical volatility, Microsoft is 1.16 times less risky than Westinghouse Air. It trades about 0.06 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 9,075 in Westinghouse Air Brake on August 31, 2024 and sell it today you would earn a total of 9,825 from holding Westinghouse Air Brake or generate 108.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.42% |
| Values | Daily Returns |
Microsoft vs. Westinghouse Air Brake
Performance |
| Timeline |
| Microsoft |
| Westinghouse Air Brake |
Microsoft and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Westinghouse Air
The main advantage of trading using opposite Microsoft and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Westinghouse Air vs. Union Pacific | Westinghouse Air vs. Superior Plus Corp | Westinghouse Air vs. NMI Holdings | Westinghouse Air vs. Origin Agritech |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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