Correlation Between Regional Container and Professional Waste

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

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

Diversification Opportunities for Regional Container and Professional Waste

0.87

Correlation Coefficient

Regional Container  Professional Waste

Very poor diversification

The 3 months correlation between Regional and Professional is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and Professional Waste Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professional Waste and Regional Container 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 Regional Container Lines are associated (or correlated) with Professional Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professional Waste has no effect on the direction of Regional Container i.e., Regional Container and Professional Waste go up and down completely randomly.

Pair Corralation between Regional Container and Professional Waste

Assuming the 90 days trading horizon Regional Container Lines is expected to generate 0.99 times more return on investment than Professional Waste. However, Regional Container Lines is 1.01 times less risky than Professional Waste. It trades about 0.12 of its potential returns per unit of risk. Professional Waste Technology is currently generating about 0.1 per unit of risk. If you would invest  2,408  in Regional Container Lines on September 23, 2024 and sell it today you would earn a total of  367.00  from holding Regional Container Lines or generate 15.24% return on investment over 90 days.

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

Regional Container Lines  vs.  Professional Waste Technology

Regional Container Lines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Regional Container sustained solid returns over the last few months and may actually be approaching a breakup point.

Professional Waste

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Professional Waste Technology are ranked lower than 7 (%) 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.

Pair Trading with Regional Container and Professional Waste

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

The idea behind Regional Container Lines and Professional Waste 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.