Correlation Between Westinghouse Air and Canadian National
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Canadian National 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 Canadian National 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 Canadian National Railway, you can compare the effects of market volatilities on Westinghouse Air and Canadian National 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 Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Canadian National.
Diversification Opportunities for Westinghouse Air and Canadian National
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Westinghouse and Canadian is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway 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 Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Canadian National go up and down completely randomly.
Pair Corralation between Westinghouse Air and Canadian National
Considering the 90-day investment horizon Westinghouse Air Brake is expected to generate 1.14 times more return on investment than Canadian National. However, Westinghouse Air is 1.14 times more volatile than Canadian National Railway. It trades about 0.11 of its potential returns per unit of risk. Canadian National Railway is currently generating about -0.01 per unit of risk. If you would invest 10,171 in Westinghouse Air Brake on October 20, 2024 and sell it today you would earn a total of 9,998 from holding Westinghouse Air Brake or generate 98.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. Canadian National Railway
Performance |
| Timeline |
| Westinghouse Air Brake |
| Canadian National Railway |
Westinghouse Air and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Canadian National
The main advantage of trading using opposite Westinghouse Air and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Canadian National 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 Canadian National will offset losses from the drop in Canadian National's long position.| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. Freightcar America | Westinghouse Air vs. CSX Corporation |
| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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