Correlation Between Republic Services and Umicore SA

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

By analyzing existing cross correlation between Republic Services and Umicore SA, you can compare the effects of market volatilities on Republic Services and Umicore SA 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 Republic Services with a short position of Umicore SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Republic Services and Umicore SA.

Diversification Opportunities for Republic Services and Umicore SA

-0.59

Correlation Coefficient

Republic Services  Umicore SA

Excellent diversification

The 3 months correlation between Republic and Umicore is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Republic Services and Umicore SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umicore SA and Republic Services 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 Republic Services are associated (or correlated) with Umicore SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umicore SA has no effect on the direction of Republic Services i.e., Republic Services and Umicore SA go up and down completely randomly.

Pair Corralation between Republic Services and Umicore SA

Assuming the 90 days horizon Republic Services is expected to generate 0.51 times more return on investment than Umicore SA. However, Republic Services is 1.95 times less risky than Umicore SA. It trades about 0.14 of its potential returns per unit of risk. Umicore SA is currently generating about -0.11 per unit of risk. If you would invest  20,439  in Republic Services on December 2, 2024 and sell it today you would earn a total of  2,061  from holding Republic Services or generate 10.08% return on investment over 90 days.

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

Republic Services  vs.  Umicore SA

Republic Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Republic Services may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Umicore SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Umicore SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Republic Services and Umicore SA

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

The idea behind Republic Services and Umicore SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.