Correlation Between Stericycle and Heritage Crystal

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

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

Diversification Opportunities for Stericycle and Heritage Crystal

0.86

Correlation Coefficient

Stericycle  Heritage Crystal

Very poor diversification

The 3 months correlation between Stericycle and Heritage is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Stericycle and Heritage Crystal Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Crystal Clean and Stericycle 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 Stericycle are associated (or correlated) with Heritage Crystal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Crystal Clean has no effect on the direction of Stericycle i.e., Stericycle and Heritage Crystal go up and down completely randomly.

Pair Corralation between Stericycle and Heritage Crystal

If you would invest  6,168  in Stericycle on September 14, 2024 and sell it today you would earn a total of  1,682  from holding Stericycle or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	2.38%
Values	Daily Returns

Stericycle  vs.  Heritage Crystal Clean

Stericycle

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Stericycle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite inconsistent fundamental indicators, Stericycle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Heritage Crystal Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Crystal Clean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Heritage Crystal is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Stericycle and Heritage Crystal

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

The idea behind Stericycle and Heritage Crystal Clean 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.