Correlation Between Majic Wheels and Casella Waste

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

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

Diversification Opportunities for Majic Wheels and Casella Waste

0.13

Correlation Coefficient

Majic Wheels  Casella Waste

Average diversification

The 3 months correlation between Majic and Casella is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Majic Wheels Corp 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 Majic Wheels 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 Majic Wheels Corp 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 Majic Wheels i.e., Majic Wheels and Casella Waste go up and down completely randomly.

Pair Corralation between Majic Wheels and Casella Waste

If you would invest  10,542  in Casella Waste Systems on December 28, 2024 and sell it today you would earn a total of  527.00  from holding Casella Waste Systems or generate 5.0% return on investment over 90 days.

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

Majic Wheels Corp  vs.  Casella Waste Systems

Majic Wheels Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Majic Wheels Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Majic Wheels is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Casella Waste Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 4 (%) 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 Majic Wheels and Casella Waste

The main advantage of trading using opposite Majic Wheels and Casella Waste positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Majic Wheels 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 Majic Wheels Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.