Correlation Between Westinghouse Air and Assurant
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Assurant 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 Assurant 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 Assurant, you can compare the effects of market volatilities on Westinghouse Air and Assurant 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 Assurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Assurant.
Diversification Opportunities for Westinghouse Air and Assurant
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westinghouse and Assurant is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Assurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assurant 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 Assurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assurant has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Assurant go up and down completely randomly.
Pair Corralation between Westinghouse Air and Assurant
Considering the 90-day investment horizon Westinghouse Air is expected to generate 3.37 times less return on investment than Assurant. But when comparing it to its historical volatility, Westinghouse Air Brake is 1.32 times less risky than Assurant. It trades about 0.17 of its potential returns per unit of risk. Assurant is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 19,423 in Assurant on August 29, 2024 and sell it today you would earn a total of 3,270 from holding Assurant or generate 16.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. Assurant
Performance |
| Timeline |
| Westinghouse Air Brake |
| Assurant |
Westinghouse Air and Assurant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Assurant
The main advantage of trading using opposite Westinghouse Air and Assurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Assurant 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 Assurant will offset losses from the drop in Assurant's long position.| Westinghouse Air vs. LB Foster | Westinghouse Air vs. Norfolk Southern | Westinghouse Air vs. Canadian Pacific Railway |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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