Correlation Between Highlight Communications and Waste Connections

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

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

Diversification Opportunities for Highlight Communications and Waste Connections

0.43

Correlation Coefficient

Highlight Communications  Waste Connections

Very weak diversification

The 3 months correlation between Highlight and Waste is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections and Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and Waste Connections go up and down completely randomly.

Pair Corralation between Highlight Communications and Waste Connections

Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the Waste Connections. In addition to that, Highlight Communications is 2.96 times more volatile than Waste Connections. It trades about -0.03 of its total potential returns per unit of risk. Waste Connections is currently generating about 0.04 per unit of volatility. If you would invest  16,768  in Waste Connections on September 15, 2024 and sell it today you would earn a total of  432.00  from holding Waste Connections or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Highlight Communications AG  vs.  Waste Connections

Highlight Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Waste Connections

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Waste Connections is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Highlight Communications and Waste Connections

The main advantage of trading using opposite Highlight Communications and Waste Connections positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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 Highlight Communications AG 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.