Correlation Between Westinghouse Air and ITOCHU
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and ITOCHU 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 ITOCHU 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 ITOCHU, you can compare the effects of market volatilities on Westinghouse Air and ITOCHU 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 ITOCHU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and ITOCHU.
Diversification Opportunities for Westinghouse Air and ITOCHU
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Westinghouse and ITOCHU is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU 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 ITOCHU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITOCHU has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and ITOCHU go up and down completely randomly.
Pair Corralation between Westinghouse Air and ITOCHU
Assuming the 90 days horizon Westinghouse Air Brake is expected to under-perform the ITOCHU. But the stock apears to be less risky and, when comparing its historical volatility, Westinghouse Air Brake is 1.13 times less risky than ITOCHU. The stock trades about -0.12 of its potential returns per unit of risk. The ITOCHU is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 4,847 in ITOCHU on October 11, 2024 and sell it today you would lose (131.00) from holding ITOCHU or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. ITOCHU
Performance |
| Timeline |
| Westinghouse Air Brake |
| ITOCHU |
Westinghouse Air and ITOCHU Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and ITOCHU
The main advantage of trading using opposite Westinghouse Air and ITOCHU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, ITOCHU 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 ITOCHU will offset losses from the drop in ITOCHU's long position.| Westinghouse Air vs. Singapore Telecommunications Limited | Westinghouse Air vs. Tower Semiconductor | Westinghouse Air vs. Rocket Internet SE | Westinghouse Air vs. Taiwan Semiconductor Manufacturing |
| ITOCHU vs. ALTAIR RES INC | ITOCHU vs. Nanjing Panda Electronics | ITOCHU vs. Westinghouse Air Brake | ITOCHU vs. Arrow 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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