Correlation Between Tokyu Construction and Westinghouse Air

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

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

Diversification Opportunities for Tokyu Construction and Westinghouse Air

0.65

Correlation Coefficient

Tokyu Construction  Westinghouse Air

Poor diversification

The 3 months correlation between Tokyu and Westinghouse is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tokyu Construction Co 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 Tokyu Construction 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 Tokyu Construction Co 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 Tokyu Construction i.e., Tokyu Construction and Westinghouse Air go up and down completely randomly.

Pair Corralation between Tokyu Construction and Westinghouse Air

Assuming the 90 days horizon Tokyu Construction Co is expected to generate 0.7 times more return on investment than Westinghouse Air. However, Tokyu Construction Co is 1.44 times less risky than Westinghouse Air. It trades about 0.15 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.06 per unit of risk. If you would invest  463.00  in Tokyu Construction Co on March 5, 2025 and sell it today you would earn a total of  82.00  from holding Tokyu Construction Co or generate 17.71% return on investment over 90 days.

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

Tokyu Construction Co  vs.  Westinghouse Air Brake

Tokyu Construction

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyu Construction Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tokyu Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Westinghouse Air Brake

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Tokyu Construction and Westinghouse Air

The main advantage of trading using opposite Tokyu Construction and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyu Construction 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 Tokyu Construction Co 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.