Correlation Between Casella Waste and Stericycle

Can any of the company-specific risk be diversified away by investing in both Casella Waste and Stericycle 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 Stericycle 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 Stericycle, you can compare the effects of market volatilities on Casella Waste and Stericycle 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 Stericycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Casella Waste and Stericycle.

Diversification Opportunities for Casella Waste and Stericycle

0.55

Correlation Coefficient

Casella Waste  Stericycle

Very weak diversification

The 3 months correlation between Casella and Stericycle is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Casella Waste Systems and Stericycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stericycle 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 Stericycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stericycle has no effect on the direction of Casella Waste i.e., Casella Waste and Stericycle go up and down completely randomly.

Pair Corralation between Casella Waste and Stericycle

Given the investment horizon of 90 days Casella Waste is expected to generate 7.95 times less return on investment than Stericycle. But when comparing it to its historical volatility, Casella Waste Systems is 2.48 times less risky than Stericycle. It trades about 0.05 of its potential returns per unit of risk. Stericycle is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,926  in Stericycle on August 30, 2024 and sell it today you would earn a total of  1,924  from holding Stericycle or generate 32.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	82.54%
Values	Daily Returns

Casella Waste Systems  vs.  Stericycle

Casella Waste Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Stericycle

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Stericycle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite inconsistent fundamental indicators, Stericycle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Casella Waste and Stericycle

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

The idea behind Casella Waste Systems and Stericycle 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.