Correlation Between Casella Waste and Banco Do

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

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

Diversification Opportunities for Casella Waste and Banco Do

-0.36

Correlation Coefficient

Casella Waste  Banco Do

Very good diversification

The 3 months correlation between Casella and Banco is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Casella Waste Systems and Banco Do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Do Brasil and Casella Waste 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 Casella Waste Systems are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Do Brasil has no effect on the direction of Casella Waste i.e., Casella Waste and Banco Do go up and down completely randomly.

Pair Corralation between Casella Waste and Banco Do

Given the investment horizon of 90 days Casella Waste Systems is expected to generate 0.81 times more return on investment than Banco Do. However, Casella Waste Systems is 1.23 times less risky than Banco Do. It trades about 0.09 of its potential returns per unit of risk. Banco Do Brasil is currently generating about -0.15 per unit of risk. If you would invest  10,475  in Casella Waste Systems on September 3, 2024 and sell it today you would earn a total of  846.00  from holding Casella Waste Systems or generate 8.08% return on investment over 90 days.

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

Casella Waste Systems  vs.  Banco Do Brasil

Casella Waste Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Casella Waste may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Banco Do Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Casella Waste and Banco Do

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

The idea behind Casella Waste Systems and Banco Do Brasil 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.