Correlation Between Sphere Entertainment and COVANTA

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

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

Diversification Opportunities for Sphere Entertainment and COVANTA

-0.05

Correlation Coefficient

Sphere Entertainment  COVANTA

Good diversification

The 3 months correlation between Sphere and COVANTA is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co 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 Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and COVANTA go up and down completely randomly.

Pair Corralation between Sphere Entertainment and COVANTA

Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 1.25 times more return on investment than COVANTA. However, Sphere Entertainment is 1.25 times more volatile than COVANTA HLDG P. It trades about -0.04 of its potential returns per unit of risk. COVANTA HLDG P is currently generating about -0.13 per unit of risk. If you would invest  4,427  in Sphere Entertainment Co on October 23, 2024 and sell it today you would lose (288.00) from holding Sphere Entertainment Co or give up 6.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Sphere Entertainment Co  vs.  COVANTA HLDG P

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 weak 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 Sphere Entertainment and COVANTA

The main advantage of trading using opposite Sphere Entertainment and COVANTA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.