Correlation Between Westinghouse Air and Pure Cycle
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Pure Cycle 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 Pure Cycle 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 Pure Cycle, you can compare the effects of market volatilities on Westinghouse Air and Pure Cycle 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 Pure Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Pure Cycle.
Diversification Opportunities for Westinghouse Air and Pure Cycle
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westinghouse and Pure is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle 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 Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Pure Cycle go up and down completely randomly.
Pair Corralation between Westinghouse Air and Pure Cycle
Considering the 90-day investment horizon Westinghouse Air is expected to generate 1.89 times less return on investment than Pure Cycle. But when comparing it to its historical volatility, Westinghouse Air Brake is 1.79 times less risky than Pure Cycle. It trades about 0.12 of its potential returns per unit of risk. Pure Cycle is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 991.00 in Pure Cycle on September 3, 2024 and sell it today you would earn a total of 463.00 from holding Pure Cycle or generate 46.72% 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. Pure Cycle
Performance |
| Timeline |
| Westinghouse Air Brake |
| Pure Cycle |
Westinghouse Air and Pure Cycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Pure Cycle
The main advantage of trading using opposite Westinghouse Air and Pure Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Pure Cycle 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 Pure Cycle will offset losses from the drop in Pure Cycle's long position.| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. Freightcar America | Westinghouse Air vs. CSX Corporation |
| Pure Cycle vs. SJW Group Common | Pure Cycle vs. Artesian Resources | Pure Cycle vs. The York Water | Pure Cycle vs. American States Water |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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