Correlation Between Clean Harbors and LiCycle Holdings

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Can any of the company-specific risk be diversified away by investing in both Clean Harbors and LiCycle Holdings 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 Clean Harbors and LiCycle Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clean Harbors and LiCycle Holdings Corp, you can compare the effects of market volatilities on Clean Harbors and LiCycle Holdings 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 Clean Harbors with a short position of LiCycle Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Harbors and LiCycle Holdings.

Diversification Opportunities for Clean Harbors and LiCycle Holdings

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Clean and LiCycle is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Clean Harbors and LiCycle Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiCycle Holdings Corp and Clean Harbors 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 Clean Harbors are associated (or correlated) with LiCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiCycle Holdings Corp has no effect on the direction of Clean Harbors i.e., Clean Harbors and LiCycle Holdings go up and down completely randomly.

Pair Corralation between Clean Harbors and LiCycle Holdings

Considering the 90-day investment horizon Clean Harbors is expected to generate 0.06 times more return on investment than LiCycle Holdings. However, Clean Harbors is 16.26 times less risky than LiCycle Holdings. It trades about 0.39 of its potential returns per unit of risk. LiCycle Holdings Corp is currently generating about -0.08 per unit of risk. If you would invest  22,861  in Clean Harbors on October 22, 2024 and sell it today you would earn a total of  1,243  from holding Clean Harbors or generate 5.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Clean Harbors  vs.  LiCycle Holdings Corp

 Performance 
       Timeline  
Clean Harbors 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Clean Harbors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Clean Harbors is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
LiCycle Holdings Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LiCycle Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Clean Harbors and LiCycle Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Clean Harbors and LiCycle Holdings

The main advantage of trading using opposite Clean Harbors and LiCycle Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Harbors position performs unexpectedly, LiCycle Holdings 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 LiCycle Holdings will offset losses from the drop in LiCycle Holdings' long position.
The idea behind Clean Harbors and LiCycle Holdings Corp 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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