Correlation Between Waste Management and Hilton Food

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

By analyzing existing cross correlation between Waste Management and Hilton Food Group, you can compare the effects of market volatilities on Waste Management and Hilton Food 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 Hilton Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Hilton Food.

Diversification Opportunities for Waste Management and Hilton Food

0.35

Correlation Coefficient

Waste Management  Hilton Food

Weak diversification

The 3 months correlation between Waste and Hilton is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Hilton Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Food Group 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 Hilton Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Food Group has no effect on the direction of Waste Management i.e., Waste Management and Hilton Food go up and down completely randomly.

Pair Corralation between Waste Management and Hilton Food

Assuming the 90 days trading horizon Waste Management is expected to under-perform the Hilton Food. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 1.66 times less risky than Hilton Food. The stock trades about -0.63 of its potential returns per unit of risk. The Hilton Food Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  88,800  in Hilton Food Group on October 6, 2024 and sell it today you would earn a total of  2,300  from holding Hilton Food Group or generate 2.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Waste Management  vs.  Hilton Food Group

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hilton Food Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Food Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hilton Food is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Waste Management and Hilton Food

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

The idea behind Waste Management and Hilton Food 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.