Correlation Between Cleanaway Waste and National Grid

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

By analyzing existing cross correlation between Cleanaway Waste Management and National Grid plc, you can compare the effects of market volatilities on Cleanaway Waste and National Grid 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 Cleanaway Waste with a short position of National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cleanaway Waste and National Grid.

Diversification Opportunities for Cleanaway Waste and National Grid

-0.19

Correlation Coefficient

Cleanaway Waste  National Grid

Good diversification

The 3 months correlation between Cleanaway and National is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Cleanaway Waste Management and National Grid plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid plc and Cleanaway Waste 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 Cleanaway Waste Management are associated (or correlated) with National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid plc has no effect on the direction of Cleanaway Waste i.e., Cleanaway Waste and National Grid go up and down completely randomly.

Pair Corralation between Cleanaway Waste and National Grid

Assuming the 90 days trading horizon Cleanaway Waste is expected to generate 17.46 times less return on investment than National Grid. In addition to that, Cleanaway Waste is 1.05 times more volatile than National Grid plc. It trades about 0.0 of its total potential returns per unit of risk. National Grid plc is currently generating about 0.05 per unit of volatility. If you would invest  5,600  in National Grid plc on December 24, 2024 and sell it today you would earn a total of  350.00  from holding National Grid plc or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Cleanaway Waste Management  vs.  National Grid plc

Cleanaway Waste Mana

Risk-Adjusted Performance

Very Weak

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

National Grid plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Grid plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, National Grid may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cleanaway Waste and National Grid

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

The idea behind Cleanaway Waste Management and National Grid plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.