Correlation Between Penta-Ocean Construction and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both Penta-Ocean Construction 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 Penta-Ocean Construction and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Penta Ocean Construction Co and Westinghouse Air Brake, you can compare the effects of market volatilities on Penta-Ocean Construction 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 Penta-Ocean Construction with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta-Ocean Construction and Westinghouse Air.
Diversification Opportunities for Penta-Ocean Construction and Westinghouse Air
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Penta-Ocean and Westinghouse is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co 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 Penta-Ocean Construction 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 Penta Ocean Construction Co 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 Penta-Ocean Construction i.e., Penta-Ocean Construction and Westinghouse Air go up and down completely randomly.
Pair Corralation between Penta-Ocean Construction and Westinghouse Air
Assuming the 90 days horizon Penta Ocean Construction Co is expected to under-perform the Westinghouse Air. But the stock apears to be less risky and, when comparing its historical volatility, Penta Ocean Construction Co is 1.06 times less risky than Westinghouse Air. The stock trades about -0.02 of its potential returns per unit of risk. The Westinghouse Air Brake is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 16,298 in Westinghouse Air Brake on August 28, 2024 and sell it today you would earn a total of 2,737 from holding Westinghouse Air Brake or generate 16.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Penta Ocean Construction Co vs. Westinghouse Air Brake
Performance |
| Timeline |
| Penta-Ocean Construction |
| Westinghouse Air Brake |
Penta-Ocean Construction and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penta-Ocean Construction and Westinghouse Air
The main advantage of trading using opposite Penta-Ocean Construction and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta-Ocean Construction 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 Penta Ocean Construction Co 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.
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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