Correlation Between Nissan Chemical and Waste Management

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

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

Diversification Opportunities for Nissan Chemical and Waste Management

0.42

Correlation Coefficient

Nissan Chemical  Waste Management

Very weak diversification

The 3 months correlation between Nissan and Waste is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nissan Chemical Corp and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Nissan Chemical 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 Nissan Chemical Corp 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 Nissan Chemical i.e., Nissan Chemical and Waste Management go up and down completely randomly.

Pair Corralation between Nissan Chemical and Waste Management

Assuming the 90 days trading horizon Nissan Chemical Corp is expected to under-perform the Waste Management. In addition to that, Nissan Chemical is 1.91 times more volatile than Waste Management. It trades about -0.43 of its total potential returns per unit of risk. Waste Management is currently generating about -0.6 per unit of volatility. If you would invest  21,648  in Waste Management on September 27, 2024 and sell it today you would lose (1,812) from holding Waste Management or give up 8.37% of portfolio value over 90 days.

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

Nissan Chemical Corp  vs.  Waste Management

Nissan Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nissan Chemical 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nissan Chemical and Waste Management

The main advantage of trading using opposite Nissan Chemical and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nissan Chemical 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 Nissan Chemical Corp 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.