Correlation Between Edible Garden and COVANTA

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

By analyzing existing cross correlation between Edible Garden AG and COVANTA HLDG P, you can compare the effects of market volatilities on Edible Garden and COVANTA 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 Edible Garden with a short position of COVANTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edible Garden and COVANTA.

Diversification Opportunities for Edible Garden and COVANTA

-0.63

Correlation Coefficient

Edible Garden  COVANTA

Excellent diversification

The 3 months correlation between Edible and COVANTA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Edible Garden AG and COVANTA HLDG P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVANTA HLDG P and Edible Garden 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 Edible Garden AG are associated (or correlated) with COVANTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVANTA HLDG P has no effect on the direction of Edible Garden i.e., Edible Garden and COVANTA go up and down completely randomly.

Pair Corralation between Edible Garden and COVANTA

Given the investment horizon of 90 days Edible Garden AG is expected to generate 7.05 times more return on investment than COVANTA. However, Edible Garden is 7.05 times more volatile than COVANTA HLDG P. It trades about 0.11 of its potential returns per unit of risk. COVANTA HLDG P is currently generating about -0.13 per unit of risk. If you would invest  21.00  in Edible Garden AG on October 6, 2024 and sell it today you would earn a total of  13.00  from holding Edible Garden AG or generate 61.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

Edible Garden AG  vs.  COVANTA HLDG P

Edible Garden AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Edible Garden disclosed solid returns over the last few months and may actually be approaching a breakup point.

COVANTA HLDG P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COVANTA HLDG P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for COVANTA HLDG P investors.

Pair Trading with Edible Garden and COVANTA

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

The idea behind Edible Garden AG and COVANTA HLDG P 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .