Correlation Between Clean Harbors and Waste Connections

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

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

Diversification Opportunities for Clean Harbors and Waste Connections

0.62

Correlation Coefficient

Clean Harbors  Waste Connections

Poor diversification

The 3 months correlation between Clean and Waste is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Clean Harbors and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections 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 Waste Connections. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Connections has no effect on the direction of Clean Harbors i.e., Clean Harbors and Waste Connections go up and down completely randomly.

Pair Corralation between Clean Harbors and Waste Connections

Considering the 90-day investment horizon Clean Harbors is expected to generate 1.64 times more return on investment than Waste Connections. However, Clean Harbors is 1.64 times more volatile than Waste Connections. It trades about 0.08 of its potential returns per unit of risk. Waste Connections is currently generating about 0.08 per unit of risk. If you would invest  13,207  in Clean Harbors on November 19, 2024 and sell it today you would earn a total of  9,771  from holding Clean Harbors or generate 73.98% return on investment over 90 days.

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

Clean Harbors  vs.  Waste Connections

Clean Harbors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clean Harbors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Waste Connections

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Waste Connections is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Clean Harbors and Waste Connections

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

The idea behind Clean Harbors and Waste Connections 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.