Correlation Between Westinghouse Air and AerSale Corp

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

Diversification Opportunities for Westinghouse Air and AerSale Corp

0.71

Correlation Coefficient

Westinghouse Air  AerSale Corp

Poor diversification

The 3 months correlation between Westinghouse and AerSale is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and AerSale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerSale Corp 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 AerSale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerSale Corp has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and AerSale Corp go up and down completely randomly.

Pair Corralation between Westinghouse Air and AerSale Corp

Considering the 90-day investment horizon Westinghouse Air is expected to generate 1.47 times less return on investment than AerSale Corp. But when comparing it to its historical volatility, Westinghouse Air Brake is 2.92 times less risky than AerSale Corp. It trades about 0.31 of its potential returns per unit of risk. AerSale Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  479.00  in AerSale Corp on September 2, 2024 and sell it today you would earn a total of  151.00  from holding AerSale Corp or generate 31.52% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  AerSale Corp

Westinghouse Air Brake

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 24 (%) 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.

AerSale Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and AerSale Corp

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

The idea behind Westinghouse Air Brake and AerSale Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.