Correlation Between Carters and Waste Management

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

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

Diversification Opportunities for Carters and Waste Management

-0.21

Correlation Coefficient

Carters  Waste Management

Very good diversification

The 3 months correlation between Carters and Waste is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Carters 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 Carters 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 Carters i.e., Carters and Waste Management go up and down completely randomly.

Pair Corralation between Carters and Waste Management

Considering the 90-day investment horizon Carters is expected to under-perform the Waste Management. In addition to that, Carters is 1.77 times more volatile than Waste Management. It trades about -0.03 of its total potential returns per unit of risk. Waste Management is currently generating about 0.07 per unit of volatility. If you would invest  14,788  in Waste Management on October 13, 2024 and sell it today you would earn a total of  5,937  from holding Waste Management or generate 40.15% return on investment over 90 days.

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

Carters  vs.  Waste Management

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Carters and Waste Management

The main advantage of trading using opposite Carters and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carters 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 Carters 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.