Correlation Between Waste Management and Cornish Metals

Can any of the company-specific risk be diversified away by investing in both Waste Management and Cornish Metals 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 Waste Management and Cornish Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Waste Management and Cornish Metals, you can compare the effects of market volatilities on Waste Management and Cornish Metals 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 Waste Management with a short position of Cornish Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Cornish Metals.

Diversification Opportunities for Waste Management and Cornish Metals

-0.82

Correlation Coefficient

Waste Management  Cornish Metals

Pay attention - limited upside

The 3 months correlation between Waste and Cornish is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Cornish Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornish Metals and Waste Management 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 Waste Management are associated (or correlated) with Cornish Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornish Metals has no effect on the direction of Waste Management i.e., Waste Management and Cornish Metals go up and down completely randomly.

Pair Corralation between Waste Management and Cornish Metals

Assuming the 90 days trading horizon Waste Management is expected to generate 0.43 times more return on investment than Cornish Metals. However, Waste Management is 2.34 times less risky than Cornish Metals. It trades about 0.23 of its potential returns per unit of risk. Cornish Metals is currently generating about -0.08 per unit of risk. If you would invest  20,107  in Waste Management on December 31, 2024 and sell it today you would earn a total of  2,872  from holding Waste Management or generate 14.28% return on investment over 90 days.

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

Waste Management  vs.  Cornish Metals

Waste Management

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Waste Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cornish Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cornish Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Waste Management and Cornish Metals

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

The idea behind Waste Management and Cornish Metals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.