Correlation Between Environmental Waste and Waste Connections

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

Diversification Opportunities for Environmental Waste and Waste Connections

-0.14

Correlation Coefficient

Environmental Waste  Waste Connections

Good diversification

The 3 months correlation between Environmental and Waste is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Environmental Waste Internatio and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections and Environmental 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 Environmental Waste International 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 Environmental Waste i.e., Environmental Waste and Waste Connections go up and down completely randomly.

Pair Corralation between Environmental Waste and Waste Connections

Assuming the 90 days horizon Environmental Waste International is not expected to generate positive returns. Moreover, Environmental Waste is 16.98 times more volatile than Waste Connections. It trades away all of its potential returns to assume current level of volatility. Waste Connections is currently generating about 0.14 per unit of risk. If you would invest  25,093  in Waste Connections on September 2, 2024 and sell it today you would earn a total of  2,049  from holding Waste Connections or generate 8.17% return on investment over 90 days.

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

Environmental Waste Internatio  vs.  Waste Connections

Environmental Waste

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Environmental Waste International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Environmental Waste is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Waste Connections

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Waste Connections may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Environmental Waste and Waste Connections

The main advantage of trading using opposite Environmental Waste and Waste Connections positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Environmental 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 Environmental Waste International 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.