Correlation Between Catalent and Westinghouse Air

Can any of the company-specific risk be diversified away by investing in both Catalent and Westinghouse Air 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 Catalent and Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Catalent and Westinghouse Air Brake, you can compare the effects of market volatilities on Catalent and Westinghouse Air 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 Catalent with a short position of Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and Westinghouse Air.

Diversification Opportunities for Catalent and Westinghouse Air

0.17

Correlation Coefficient

Catalent  Westinghouse Air

Average diversification

The 3 months correlation between Catalent and Westinghouse is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake and Catalent 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 Catalent are associated (or correlated) with Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of Catalent i.e., Catalent and Westinghouse Air go up and down completely randomly.

Pair Corralation between Catalent and Westinghouse Air

Given the investment horizon of 90 days Catalent is expected to generate 1.23 times less return on investment than Westinghouse Air. But when comparing it to its historical volatility, Catalent is 1.77 times less risky than Westinghouse Air. It trades about 0.14 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  18,044  in Westinghouse Air Brake on September 24, 2024 and sell it today you would earn a total of  1,259  from holding Westinghouse Air Brake or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Catalent  vs.  Westinghouse Air Brake

Catalent

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Westinghouse Air Brake

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Catalent and Westinghouse Air

The main advantage of trading using opposite Catalent and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent position performs unexpectedly, Westinghouse Air 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 Westinghouse Air will offset losses from the drop in Westinghouse Air's long position.

The idea behind Catalent and Westinghouse Air Brake pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.