Correlation Between ESGL Holdings and Waste Connections

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

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

Diversification Opportunities for ESGL Holdings and Waste Connections

0.27

Correlation Coefficient

ESGL Holdings  Waste Connections

Modest diversification

The 3 months correlation between ESGL and Waste is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections and ESGL Holdings 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 ESGL Holdings Limited 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 ESGL Holdings i.e., ESGL Holdings and Waste Connections go up and down completely randomly.

Pair Corralation between ESGL Holdings and Waste Connections

Assuming the 90 days horizon ESGL Holdings Limited is expected to generate 16.78 times more return on investment than Waste Connections. However, ESGL Holdings is 16.78 times more volatile than Waste Connections. It trades about 0.16 of its potential returns per unit of risk. Waste Connections is currently generating about 0.06 per unit of risk. If you would invest  1.00  in ESGL Holdings Limited on September 4, 2024 and sell it today you would earn a total of  0.80  from holding ESGL Holdings Limited or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.31%
Values	Daily Returns

ESGL Holdings Limited  vs.  Waste Connections

ESGL Holdings Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Waste Connections

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 4 (%) 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 ESGL Holdings and Waste Connections

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

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.