Correlation Between Under Armour and Waste Management

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

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

Diversification Opportunities for Under Armour and Waste Management

0.69

Correlation Coefficient

Under Armour  Waste Management

Poor diversification

The 3 months correlation between Under and Waste is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Under Armour 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 Under Armour C are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Under Armour i.e., Under Armour and Waste Management go up and down completely randomly.

Pair Corralation between Under Armour and Waste Management

Allowing for the 90-day total investment horizon Under Armour C is expected to under-perform the Waste Management. In addition to that, Under Armour is 3.77 times more volatile than Waste Management. It trades about -0.26 of its total potential returns per unit of risk. Waste Management is currently generating about -0.59 per unit of volatility. If you would invest  22,489  in Waste Management on September 25, 2024 and sell it today you would lose (2,008) from holding Waste Management or give up 8.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Under Armour C  vs.  Waste Management

Under Armour C

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Under Armour C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Under Armour is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Waste Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Under Armour and Waste Management

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

The idea behind Under Armour C and Waste Management 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.