Correlation Between Smith Douglas and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both Smith Douglas 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 Smith Douglas and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith Douglas Homes and Westinghouse Air Brake, you can compare the effects of market volatilities on Smith Douglas 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 Smith Douglas with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Douglas and Westinghouse Air.
Diversification Opportunities for Smith Douglas and Westinghouse Air
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smith and Westinghouse is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes 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 Smith Douglas 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 Smith Douglas Homes 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 Smith Douglas i.e., Smith Douglas and Westinghouse Air go up and down completely randomly.
Pair Corralation between Smith Douglas and Westinghouse Air
Given the investment horizon of 90 days Smith Douglas is expected to generate 1.23 times less return on investment than Westinghouse Air. In addition to that, Smith Douglas is 2.63 times more volatile than Westinghouse Air Brake. It trades about 0.04 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.13 per unit of volatility. If you would invest 16,052 in Westinghouse Air Brake on August 28, 2024 and sell it today you would earn a total of 4,119 from holding Westinghouse Air Brake or generate 25.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smith Douglas Homes vs. Westinghouse Air Brake
Performance |
| Timeline |
| Smith Douglas Homes |
| Westinghouse Air Brake |
Smith Douglas and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith Douglas and Westinghouse Air
The main advantage of trading using opposite Smith Douglas and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Douglas 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.| Smith Douglas vs. Albertsons Companies | Smith Douglas vs. United Homes Group | Smith Douglas vs. Haverty Furniture Companies | Smith Douglas vs. Beyond Meat |
| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. Freightcar America | Westinghouse Air vs. CSX Corporation |
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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