Correlation Between BCB Bancorp and Waste Management

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

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

Diversification Opportunities for BCB Bancorp and Waste Management

0.81

Correlation Coefficient

BCB Bancorp  Waste Management

Very poor diversification

The 3 months correlation between BCB and Waste is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BCB Bancorp and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and BCB Bancorp 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 BCB Bancorp are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of BCB Bancorp i.e., BCB Bancorp and Waste Management go up and down completely randomly.

Pair Corralation between BCB Bancorp and Waste Management

Given the investment horizon of 90 days BCB Bancorp is expected to under-perform the Waste Management. In addition to that, BCB Bancorp is 3.1 times more volatile than Waste Management. It trades about -0.3 of its total potential returns per unit of risk. Waste Management is currently generating about -0.66 per unit of volatility. If you would invest  22,489  in Waste Management on September 25, 2024 and sell it today you would lose (2,109) from holding Waste Management or give up 9.38% of portfolio value over 90 days.

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

BCB Bancorp  vs.  Waste Management

BCB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, BCB Bancorp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

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 very healthy primary indicators, Waste Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BCB Bancorp and Waste Management

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

The idea behind BCB Bancorp and Waste Management 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.