Correlation Between Defiance Quantum and COVANTA

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

By analyzing existing cross correlation between Defiance Quantum ETF and COVANTA HLDG P, you can compare the effects of market volatilities on Defiance Quantum and COVANTA 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 Defiance Quantum with a short position of COVANTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defiance Quantum and COVANTA.

Diversification Opportunities for Defiance Quantum and COVANTA

-0.49

Correlation Coefficient

Defiance Quantum  COVANTA

Very good diversification

The 3 months correlation between Defiance and COVANTA is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Quantum ETF and COVANTA HLDG P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVANTA HLDG P and Defiance Quantum 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 Defiance Quantum ETF are associated (or correlated) with COVANTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVANTA HLDG P has no effect on the direction of Defiance Quantum i.e., Defiance Quantum and COVANTA go up and down completely randomly.

Pair Corralation between Defiance Quantum and COVANTA

Given the investment horizon of 90 days Defiance Quantum ETF is expected to generate 1.15 times more return on investment than COVANTA. However, Defiance Quantum is 1.15 times more volatile than COVANTA HLDG P. It trades about 0.24 of its potential returns per unit of risk. COVANTA HLDG P is currently generating about -0.26 per unit of risk. If you would invest  7,212  in Defiance Quantum ETF on October 6, 2024 and sell it today you would earn a total of  1,146  from holding Defiance Quantum ETF or generate 15.89% return on investment over 90 days.

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

Defiance Quantum ETF  vs.  COVANTA HLDG P

Defiance Quantum ETF

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Quantum ETF are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Defiance Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

COVANTA HLDG P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Defiance Quantum and COVANTA

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

The idea behind Defiance Quantum ETF and COVANTA HLDG P 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.