Correlation Between Westinghouse Air and MTR Corp
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and MTR Corp 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 MTR Corp 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 MTR Corp, you can compare the effects of market volatilities on Westinghouse Air and MTR Corp 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 MTR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and MTR Corp.
Diversification Opportunities for Westinghouse Air and MTR Corp
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Westinghouse and MTR is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and MTR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTR Corp 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 MTR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTR Corp has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and MTR Corp go up and down completely randomly.
Pair Corralation between Westinghouse Air and MTR Corp
Considering the 90-day investment horizon Westinghouse Air Brake is expected to generate 0.43 times more return on investment than MTR Corp. However, Westinghouse Air Brake is 2.33 times less risky than MTR Corp. It trades about 0.11 of its potential returns per unit of risk. MTR Corp is currently generating about -0.01 per unit of risk. If you would invest 10,179 in Westinghouse Air Brake on September 3, 2024 and sell it today you would earn a total of 9,883 from holding Westinghouse Air Brake or generate 97.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 64.85% |
| Values | Daily Returns |
Westinghouse Air Brake vs. MTR Corp
Performance |
| Timeline |
| Westinghouse Air Brake |
| MTR Corp |
Westinghouse Air and MTR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and MTR Corp
The main advantage of trading using opposite Westinghouse Air and MTR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, MTR Corp 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 MTR Corp will offset losses from the drop in MTR Corp's long position.| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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