Correlation Between Westinghouse Air and East Japan
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and East Japan 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 East Japan 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 East Japan Railway, you can compare the effects of market volatilities on Westinghouse Air and East Japan 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 East Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and East Japan.
Diversification Opportunities for Westinghouse Air and East Japan
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westinghouse and East is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway 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 East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and East Japan go up and down completely randomly.
Pair Corralation between Westinghouse Air and East Japan
Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 0.86 times more return on investment than East Japan. However, Westinghouse Air Brake is 1.16 times less risky than East Japan. It trades about 0.13 of its potential returns per unit of risk. East Japan Railway is currently generating about -0.02 per unit of risk. If you would invest 12,189 in Westinghouse Air Brake on October 17, 2024 and sell it today you would earn a total of 6,811 from holding Westinghouse Air Brake or generate 55.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.56% |
| Values | Daily Returns |
Westinghouse Air Brake vs. East Japan Railway
Performance |
| Timeline |
| Westinghouse Air Brake |
| East Japan Railway |
Westinghouse Air and East Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and East Japan
The main advantage of trading using opposite Westinghouse Air and East Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, East Japan 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 East Japan will offset losses from the drop in East Japan's long position.| Westinghouse Air vs. Silicon Motion Technology | Westinghouse Air vs. Linedata Services SA | Westinghouse Air vs. Sinopec Shanghai Petrochemical | Westinghouse Air vs. Pure Storage |
| East Japan vs. China Communications Services | East Japan vs. Guidewire Software | East Japan vs. CRISPR Therapeutics AG | East Japan vs. Unity Software |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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