Correlation Between Westinghouse Air and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and NETGEAR 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 NETGEAR 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 NETGEAR, you can compare the effects of market volatilities on Westinghouse Air and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and NETGEAR.
Diversification Opportunities for Westinghouse Air and NETGEAR
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westinghouse and NETGEAR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and NETGEAR go up and down completely randomly.
Pair Corralation between Westinghouse Air and NETGEAR
Considering the 90-day investment horizon Westinghouse Air is expected to generate 1.31 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Westinghouse Air Brake is 2.65 times less risky than NETGEAR. It trades about 0.18 of its potential returns per unit of risk. NETGEAR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,191 in NETGEAR on September 4, 2024 and sell it today you would earn a total of 1,266 from holding NETGEAR or generate 106.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. NETGEAR
Performance |
| Timeline |
| Westinghouse Air Brake |
| NETGEAR |
Westinghouse Air and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and NETGEAR
The main advantage of trading using opposite Westinghouse Air and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. Freightcar America | Westinghouse Air vs. CSX Corporation |
| NETGEAR vs. Cambium Networks Corp | NETGEAR vs. KVH Industries | NETGEAR vs. Knowles Cor | NETGEAR vs. Ituran Location and |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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