Correlation Between Westinghouse Air and Marchex

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

Diversification Opportunities for Westinghouse Air and Marchex

0.22

Correlation Coefficient

Westinghouse Air  Marchex

Modest diversification

The 3 months correlation between Westinghouse and Marchex is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex 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 Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and Marchex go up and down completely randomly.

Pair Corralation between Westinghouse Air and Marchex

Considering the 90-day investment horizon Westinghouse Air is expected to generate 1.65 times less return on investment than Marchex. But when comparing it to its historical volatility, Westinghouse Air Brake is 3.79 times less risky than Marchex. It trades about 0.25 of its potential returns per unit of risk. Marchex is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  167.00  in Marchex on September 18, 2024 and sell it today you would earn a total of  40.00  from holding Marchex or generate 23.95% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  Marchex

Westinghouse Air Brake

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 19 (%) 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.

Marchex

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Marchex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westinghouse Air and Marchex

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

The idea behind Westinghouse Air Brake and Marchex 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.