Correlation Between Westinghouse Air and Azure Holding

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

Diversification Opportunities for Westinghouse Air and Azure Holding

0.6

Correlation Coefficient

Westinghouse Air  Azure Holding

Poor diversification

The 3 months correlation between Westinghouse and Azure is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Azure Holding Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azure Holding Group 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 Azure Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azure Holding Group has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Azure Holding go up and down completely randomly.

Pair Corralation between Westinghouse Air and Azure Holding

Considering the 90-day investment horizon Westinghouse Air is expected to generate 80.59 times less return on investment than Azure Holding. But when comparing it to its historical volatility, Westinghouse Air Brake is 32.45 times less risky than Azure Holding. It trades about 0.06 of its potential returns per unit of risk. Azure Holding Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Azure Holding Group on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Azure Holding Group or generate 9.09% 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.  Azure Holding Group

Westinghouse Air Brake

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 25 (%) 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.

Azure Holding Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Azure Holding Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Azure Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and Azure Holding

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

The idea behind Westinghouse Air Brake and Azure Holding Group 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.