Correlation Between Montrose Environmental and Casella Waste

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

By analyzing existing cross correlation between Montrose Environmental Grp and Casella Waste Systems, you can compare the effects of market volatilities on Montrose Environmental and Casella Waste 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 Montrose Environmental with a short position of Casella Waste. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montrose Environmental and Casella Waste.

Diversification Opportunities for Montrose Environmental and Casella Waste

0.01

Correlation Coefficient

Montrose Environmental  Casella Waste

Significant diversification

The 3 months correlation between Montrose and Casella is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Montrose Environmental Grp and Casella Waste Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casella Waste Systems and Montrose Environmental 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 Montrose Environmental Grp are associated (or correlated) with Casella Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casella Waste Systems has no effect on the direction of Montrose Environmental i.e., Montrose Environmental and Casella Waste go up and down completely randomly.

Pair Corralation between Montrose Environmental and Casella Waste

Considering the 90-day investment horizon Montrose Environmental Grp is expected to under-perform the Casella Waste. In addition to that, Montrose Environmental is 2.85 times more volatile than Casella Waste Systems. It trades about -0.03 of its total potential returns per unit of risk. Casella Waste Systems is currently generating about 0.06 per unit of volatility. If you would invest  7,782  in Casella Waste Systems on November 19, 2024 and sell it today you would earn a total of  3,354  from holding Casella Waste Systems or generate 43.1% return on investment over 90 days.

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

Montrose Environmental Grp  vs.  Casella Waste Systems

Montrose Environmental

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Montrose Environmental Grp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Montrose Environmental reported solid returns over the last few months and may actually be approaching a breakup point.

Casella Waste Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Montrose Environmental and Casella Waste

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

The idea behind Montrose Environmental Grp and Casella Waste Systems 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.