Correlation Between Waste Management and Sabre Insurance

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

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

Diversification Opportunities for Waste Management and Sabre Insurance

-0.82

Correlation Coefficient

Waste Management  Sabre Insurance

Pay attention - limited upside

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

Pair Corralation between Waste Management and Sabre Insurance

Assuming the 90 days trading horizon Waste Management is expected to generate 0.7 times more return on investment than Sabre Insurance. However, Waste Management is 1.44 times less risky than Sabre Insurance. It trades about 0.07 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about 0.0 per unit of risk. If you would invest  20,602  in Waste Management on September 12, 2024 and sell it today you would earn a total of  1,045  from holding Waste Management or generate 5.07% 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.  Sabre Insurance Group

Waste Management

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Waste Management and Sabre Insurance

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

The idea behind Waste Management and Sabre Insurance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.