Correlation Between Westinghouse Air and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES, you can compare the effects of market volatilities on Westinghouse Air and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and NORTHEAST UTILITIES.
Diversification Opportunities for Westinghouse Air and NORTHEAST UTILITIES
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westinghouse and NORTHEAST is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHEAST UTILITIES has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between Westinghouse Air and NORTHEAST UTILITIES
Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 1.36 times more return on investment than NORTHEAST UTILITIES. However, Westinghouse Air is 1.36 times more volatile than NORTHEAST UTILITIES. It trades about 0.13 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about 0.08 per unit of risk. If you would invest 15,033 in Westinghouse Air Brake on September 1, 2024 and sell it today you would earn a total of 4,042 from holding Westinghouse Air Brake or generate 26.89% 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. NORTHEAST UTILITIES
Performance |
| Timeline |
| Westinghouse Air Brake |
| NORTHEAST UTILITIES |
Westinghouse Air and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and NORTHEAST UTILITIES
The main advantage of trading using opposite Westinghouse Air and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, NORTHEAST UTILITIES 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 NORTHEAST UTILITIES will offset losses from the drop in NORTHEAST UTILITIES's long position.| Westinghouse Air vs. Union Pacific | Westinghouse Air vs. Superior Plus Corp | Westinghouse Air vs. NMI Holdings | Westinghouse Air vs. Origin Agritech |
| NORTHEAST UTILITIES vs. SIVERS SEMICONDUCTORS AB | NORTHEAST UTILITIES vs. Darden Restaurants | NORTHEAST UTILITIES vs. Reliance Steel Aluminum | NORTHEAST UTILITIES vs. Q2M Managementberatung AG |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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