Correlation Between Waste Connections and Umicore SA

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

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

Diversification Opportunities for Waste Connections and Umicore SA

-0.69

Correlation Coefficient

Waste Connections  Umicore SA

Excellent diversification

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

Pair Corralation between Waste Connections and Umicore SA

Assuming the 90 days trading horizon Waste Connections is expected to generate 0.45 times more return on investment than Umicore SA. However, Waste Connections is 2.24 times less risky than Umicore SA. It trades about 0.13 of its potential returns per unit of risk. Umicore SA is currently generating about -0.12 per unit of risk. If you would invest  13,034  in Waste Connections on September 4, 2024 and sell it today you would earn a total of  5,196  from holding Waste Connections or generate 39.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Waste Connections  vs.  Umicore SA

Waste Connections

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Waste Connections may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Umicore SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Umicore SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Umicore SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Waste Connections and Umicore SA

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

The idea behind Waste Connections and Umicore SA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.