Correlation Between Westinghouse Air and Douglas Dynamics
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Douglas Dynamics 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 Douglas Dynamics 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 Douglas Dynamics, you can compare the effects of market volatilities on Westinghouse Air and Douglas Dynamics 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 Douglas Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Douglas Dynamics.
Diversification Opportunities for Westinghouse Air and Douglas Dynamics
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westinghouse and Douglas is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics 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 Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Douglas Dynamics go up and down completely randomly.
Pair Corralation between Westinghouse Air and Douglas Dynamics
Considering the 90-day investment horizon Westinghouse Air Brake is expected to under-perform the Douglas Dynamics. In addition to that, Westinghouse Air is 1.95 times more volatile than Douglas Dynamics. It trades about -0.12 of its total potential returns per unit of risk. Douglas Dynamics is currently generating about 0.14 per unit of volatility. If you would invest 2,473 in Douglas Dynamics on November 18, 2024 and sell it today you would earn a total of 93.00 from holding Douglas Dynamics or generate 3.76% 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. Douglas Dynamics
Performance |
| Timeline |
| Westinghouse Air Brake |
| Douglas Dynamics |
Westinghouse Air and Douglas Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Douglas Dynamics
The main advantage of trading using opposite Westinghouse Air and Douglas Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Douglas Dynamics 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 Douglas Dynamics will offset losses from the drop in Douglas Dynamics' long position.| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. Freightcar America | Westinghouse Air vs. CSX Corporation |
| Douglas Dynamics vs. Monro Muffler Brake | Douglas Dynamics vs. Motorcar Parts of | Douglas Dynamics vs. Standard Motor Products | Douglas Dynamics vs. Stoneridge |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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