Correlation Between Scholastic and Westinghouse Air

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

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

Diversification Opportunities for Scholastic and Westinghouse Air

-0.28

Correlation Coefficient

Scholastic  Westinghouse Air

Very good diversification

The 3 months correlation between Scholastic and Westinghouse is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Scholastic 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 Scholastic 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 Scholastic 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 Scholastic i.e., Scholastic and Westinghouse Air go up and down completely randomly.

Pair Corralation between Scholastic and Westinghouse Air

Given the investment horizon of 90 days Scholastic is expected to under-perform the Westinghouse Air. In addition to that, Scholastic is 3.24 times more volatile than Westinghouse Air Brake. It trades about -0.14 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.08 per unit of volatility. If you would invest  18,159  in Westinghouse Air Brake on September 29, 2024 and sell it today you would earn a total of  1,041  from holding Westinghouse Air Brake or generate 5.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Scholastic  vs.  Westinghouse Air Brake

Scholastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scholastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Westinghouse Air Brake

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Westinghouse Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scholastic and Westinghouse Air

The main advantage of trading using opposite Scholastic and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scholastic 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 Scholastic 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.