Correlation Between SMX Public and Casella Waste

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

By analyzing existing cross correlation between SMX Public Limited and Casella Waste Systems, you can compare the effects of market volatilities on SMX Public and Casella 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 SMX Public with a short position of Casella Waste. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMX Public and Casella Waste.

Diversification Opportunities for SMX Public and Casella Waste

-0.51

Correlation Coefficient

SMX Public  Casella Waste

Excellent diversification

The 3 months correlation between SMX and Casella is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding SMX Public Limited and Casella Waste Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casella Waste Systems and SMX Public 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 SMX Public Limited are associated (or correlated) with Casella Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casella Waste Systems has no effect on the direction of SMX Public i.e., SMX Public and Casella Waste go up and down completely randomly.

Pair Corralation between SMX Public and Casella Waste

Considering the 90-day investment horizon SMX Public Limited is expected to generate 26.34 times more return on investment than Casella Waste. However, SMX Public is 26.34 times more volatile than Casella Waste Systems. It trades about 0.11 of its potential returns per unit of risk. Casella Waste Systems is currently generating about -0.03 per unit of risk. If you would invest  27.00  in SMX Public Limited on September 15, 2024 and sell it today you would earn a total of  1.00  from holding SMX Public Limited or generate 3.7% return on investment over 90 days.

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

SMX Public Limited  vs.  Casella Waste Systems

SMX Public Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMX Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Casella Waste Systems

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Casella Waste Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SMX Public and Casella Waste

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

The idea behind SMX Public Limited and Casella Waste Systems 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.