Correlation Between Casella Waste and Waste Connections

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

Diversification Opportunities for Casella Waste and Waste Connections

0.92

Correlation Coefficient

Casella Waste  Waste Connections

Almost no diversification

The 3 months correlation between Casella and Waste is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Casella Waste Systems and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections 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 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 Casella Waste i.e., Casella Waste and Waste Connections go up and down completely randomly.

Pair Corralation between Casella Waste and Waste Connections

Given the investment horizon of 90 days Casella Waste Systems is expected to generate 1.7 times more return on investment than Waste Connections. However, Casella Waste is 1.7 times more volatile than Waste Connections. It trades about 0.09 of its potential returns per unit of risk. Waste Connections is currently generating about 0.07 per unit of risk. If you would invest  10,475  in Casella Waste Systems on September 1, 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 Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Casella Waste Systems  vs.  Waste Connections

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 December 2024.

Waste Connections

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 5 (%) 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 Casella Waste and Waste Connections

The main advantage of trading using opposite Casella Waste and Waste Connections positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Casella Waste 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 Casella Waste Systems 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.