Correlation Between Westinghouse Air and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment Limited, you can compare the effects of market volatilities on Westinghouse Air and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Guangdong Investment.
Diversification Opportunities for Westinghouse Air and Guangdong Investment
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Westinghouse and Guangdong is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Guangdong Investment go up and down completely randomly.
Pair Corralation between Westinghouse Air and Guangdong Investment
Assuming the 90 days horizon Westinghouse Air is expected to generate 3.02 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, Westinghouse Air Brake is 3.56 times less risky than Guangdong Investment. It trades about 0.12 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 23.00 in Guangdong Investment Limited on November 3, 2024 and sell it today you would earn a total of 46.00 from holding Guangdong Investment Limited or generate 200.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. Guangdong Investment Limited
Performance |
| Timeline |
| Westinghouse Air Brake |
| Guangdong Investment |
Westinghouse Air and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Guangdong Investment
The main advantage of trading using opposite Westinghouse Air and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| Westinghouse Air vs. SOUTHWEST AIRLINES | Westinghouse Air vs. Southwest Airlines Co | Westinghouse Air vs. TreeHouse Foods | Westinghouse Air vs. SENECA FOODS A |
| Guangdong Investment vs. Hollywood Bowl Group | Guangdong Investment vs. Tencent Music Entertainment | Guangdong Investment vs. PROSIEBENSAT1 MEDIADR4 | Guangdong Investment vs. Benchmark 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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