Correlation Between Westinghouse Air and Northland Power
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Northland Power 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 Northland Power 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 Northland Power, you can compare the effects of market volatilities on Westinghouse Air and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Northland Power.
Diversification Opportunities for Westinghouse Air and Northland Power
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westinghouse and Northland is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Northland Power go up and down completely randomly.
Pair Corralation between Westinghouse Air and Northland Power
Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 0.55 times more return on investment than Northland Power. However, Westinghouse Air Brake is 1.81 times less risky than Northland Power. It trades about 0.1 of its potential returns per unit of risk. Northland Power is currently generating about -0.02 per unit of risk. If you would invest 9,504 in Westinghouse Air Brake on October 27, 2024 and sell it today you would earn a total of 10,391 from holding Westinghouse Air Brake or generate 109.33% 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. Northland Power
Performance |
| Timeline |
| Westinghouse Air Brake |
| Northland Power |
Westinghouse Air and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Northland Power
The main advantage of trading using opposite Westinghouse Air and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| Westinghouse Air vs. Siamgas And Petrochemicals | Westinghouse Air vs. UNITED RENTALS | Westinghouse Air vs. Fortescue Metals Group | Westinghouse Air vs. Air Lease |
| Northland Power vs. Renesas Electronics | Northland Power vs. Jacquet Metal Service | Northland Power vs. ARROW ELECTRONICS | Northland Power vs. LPKF Laser Electronics |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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