Correlation Between Pentagon I and Waste Connections

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

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

Diversification Opportunities for Pentagon I and Waste Connections

0.08

Correlation Coefficient

Pentagon I  Waste Connections

Significant diversification

The 3 months correlation between Pentagon and Waste is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections and Pentagon I 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 Pentagon I Capital 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 Pentagon I i.e., Pentagon I and Waste Connections go up and down completely randomly.

Pair Corralation between Pentagon I and Waste Connections

Assuming the 90 days trading horizon Pentagon I Capital is expected to under-perform the Waste Connections. In addition to that, Pentagon I is 8.22 times more volatile than Waste Connections. It trades about -0.1 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  26,812  in Waste Connections on December 2, 2024 and sell it today you would earn a total of  624.00  from holding Waste Connections or generate 2.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Pentagon I Capital  vs.  Waste Connections

Pentagon I Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Waste Connections

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Waste Connections is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pentagon I and Waste Connections

The main advantage of trading using opposite Pentagon I and Waste Connections positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentagon I 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 Pentagon I Capital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.