Correlation Between North American and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Westinghouse Air Brake, you can compare the effects of market volatilities on North American 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 North American with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Westinghouse Air.
Diversification Opportunities for North American and Westinghouse Air
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and Westinghouse is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction 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 North American 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 North American Construction 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 North American i.e., North American and Westinghouse Air go up and down completely randomly.
Pair Corralation between North American and Westinghouse Air
Assuming the 90 days horizon North American is expected to generate 3.85 times less return on investment than Westinghouse Air. In addition to that, North American is 1.95 times more volatile than Westinghouse Air Brake. It trades about 0.02 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.14 per unit of volatility. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Westinghouse Air Brake
Performance |
| Timeline |
| North American Const |
| Westinghouse Air Brake |
North American and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Westinghouse Air
The main advantage of trading using opposite North American and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. VIVA WINE GROUP | North American vs. Lendlease Group | North American vs. SANOK RUBBER ZY | North American vs. EAGLE MATERIALS |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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