Correlation Between Westinghouse Air and Dell Technologies
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Dell Technologies 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 Westinghouse Air and Dell Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westinghouse Air Brake and Dell Technologies, you can compare the effects of market volatilities on Westinghouse Air and Dell Technologies 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 Westinghouse Air with a short position of Dell Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Dell Technologies.
Diversification Opportunities for Westinghouse Air and Dell Technologies
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Westinghouse and Dell is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies and Westinghouse Air 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 Westinghouse Air Brake are associated (or correlated) with Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Dell Technologies go up and down completely randomly.
Pair Corralation between Westinghouse Air and Dell Technologies
Assuming the 90 days trading horizon Westinghouse Air Brake is expected to under-perform the Dell Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Westinghouse Air Brake is 1.79 times less risky than Dell Technologies. The stock trades about -0.3 of its potential returns per unit of risk. The Dell Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 70,775 in Dell Technologies on October 11, 2024 and sell it today you would earn a total of 2,175 from holding Dell Technologies or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. Dell Technologies
Performance |
| Timeline |
| Westinghouse Air Brake |
| Dell Technologies |
Westinghouse Air and Dell Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Dell Technologies
The main advantage of trading using opposite Westinghouse Air and Dell Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Dell Technologies 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 Dell Technologies will offset losses from the drop in Dell Technologies' long position.| Westinghouse Air vs. STMicroelectronics NV | Westinghouse Air vs. DXC Technology | Westinghouse Air vs. Spotify Technology SA | Westinghouse Air vs. Take Two Interactive Software |
| Dell Technologies vs. Seagate Technology Holdings | Dell Technologies vs. Warner Music Group | Dell Technologies vs. Applied Materials, | Dell Technologies vs. Take Two Interactive Software |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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