Correlation Between Westinghouse Air and Abacus Life

Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and Abacus Life 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 Abacus Life 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 Abacus Life, you can compare the effects of market volatilities on Westinghouse Air and Abacus Life 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 Abacus Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Abacus Life.

Diversification Opportunities for Westinghouse Air and Abacus Life

-0.64

Correlation Coefficient

Westinghouse Air  Abacus Life

Excellent diversification

The 3 months correlation between Westinghouse and Abacus is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Abacus Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus Life 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 Abacus Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus Life has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Abacus Life go up and down completely randomly.

Pair Corralation between Westinghouse Air and Abacus Life

Considering the 90-day investment horizon Westinghouse Air is expected to generate 4.48 times less return on investment than Abacus Life. But when comparing it to its historical volatility, Westinghouse Air Brake is 6.08 times less risky than Abacus Life. It trades about 0.12 of its potential returns per unit of risk. Abacus Life is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Abacus Life on September 13, 2024 and sell it today you would earn a total of  84.00  from holding Abacus Life or generate 300.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	73.68%
Values	Daily Returns

Westinghouse Air Brake  vs.  Abacus Life

Westinghouse Air Brake

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Abacus Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abacus Life has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Westinghouse Air and Abacus Life

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

The idea behind Westinghouse Air Brake and Abacus Life 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.