Correlation Between Westinghouse Air and Phillips
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Phillips 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 Phillips 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 Phillips 66, you can compare the effects of market volatilities on Westinghouse Air and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Phillips.
Diversification Opportunities for Westinghouse Air and Phillips
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Westinghouse and Phillips is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Phillips go up and down completely randomly.
Pair Corralation between Westinghouse Air and Phillips
Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 0.92 times more return on investment than Phillips. However, Westinghouse Air Brake is 1.08 times less risky than Phillips. It trades about 0.09 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.05 per unit of risk. If you would invest 8,721 in Westinghouse Air Brake on December 12, 2024 and sell it today you would earn a total of 7,579 from holding Westinghouse Air Brake or generate 86.91% 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. Phillips 66
Performance |
| Timeline |
| Westinghouse Air Brake |
| Phillips 66 |
Westinghouse Air and Phillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Phillips
The main advantage of trading using opposite Westinghouse Air and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.| Westinghouse Air vs. ADRIATIC METALS LS 013355 | ||
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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