Correlation Between Professional Waste and Advanced Information

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

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

Diversification Opportunities for Professional Waste and Advanced Information

0.2

Correlation Coefficient

Professional Waste  Advanced Information

Modest diversification

The 3 months correlation between Professional and Advanced is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Professional Waste Technology and Advanced Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Information and Professional Waste 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 Professional Waste Technology are associated (or correlated) with Advanced Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Information has no effect on the direction of Professional Waste i.e., Professional Waste and Advanced Information go up and down completely randomly.

Pair Corralation between Professional Waste and Advanced Information

Assuming the 90 days trading horizon Professional Waste Technology is expected to generate 1.43 times more return on investment than Advanced Information. However, Professional Waste is 1.43 times more volatile than Advanced Information Technology. It trades about 0.07 of its potential returns per unit of risk. Advanced Information Technology is currently generating about 0.05 per unit of risk. If you would invest  35.00  in Professional Waste Technology on October 8, 2024 and sell it today you would lose (35.00) from holding Professional Waste Technology or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.28%
Values	Daily Returns

Professional Waste Technology  vs.  Advanced Information Technolog

Professional Waste

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Professional Waste Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Professional Waste disclosed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Professional Waste and Advanced Information

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

The idea behind Professional Waste Technology and Advanced Information Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.