Correlation Between Fidelity Sustainable and Waste Management

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

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

Diversification Opportunities for Fidelity Sustainable and Waste Management

0.47

Correlation Coefficient

Fidelity Sustainable  Waste Management

Very weak diversification

The 3 months correlation between Fidelity and Waste is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable USD and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Fidelity Sustainable 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 Fidelity Sustainable USD are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Fidelity Sustainable i.e., Fidelity Sustainable and Waste Management go up and down completely randomly.

Pair Corralation between Fidelity Sustainable and Waste Management

Assuming the 90 days trading horizon Fidelity Sustainable is expected to generate 3.81 times less return on investment than Waste Management. But when comparing it to its historical volatility, Fidelity Sustainable USD is 2.39 times less risky than Waste Management. It trades about 0.05 of its potential returns per unit of risk. Waste Management is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,853  in Waste Management on October 21, 2024 and sell it today you would earn a total of  6,334  from holding Waste Management or generate 42.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Fidelity Sustainable USD  vs.  Waste Management

Fidelity Sustainable USD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Sustainable USD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fidelity Sustainable is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity Sustainable and Waste Management

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

The idea behind Fidelity Sustainable USD and Waste Management 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.