Correlation Between COVANTA and Abcellera Biologics

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

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

Diversification Opportunities for COVANTA and Abcellera Biologics

0.15

Correlation Coefficient

COVANTA  Abcellera Biologics

Average diversification

The 3 months correlation between COVANTA and Abcellera is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding COVANTA HLDG P and Abcellera Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abcellera Biologics and COVANTA 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 COVANTA HLDG P are associated (or correlated) with Abcellera Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abcellera Biologics has no effect on the direction of COVANTA i.e., COVANTA and Abcellera Biologics go up and down completely randomly.

Pair Corralation between COVANTA and Abcellera Biologics

Assuming the 90 days trading horizon COVANTA HLDG P is expected to generate 0.21 times more return on investment than Abcellera Biologics. However, COVANTA HLDG P is 4.74 times less risky than Abcellera Biologics. It trades about -0.11 of its potential returns per unit of risk. Abcellera Biologics is currently generating about -0.05 per unit of risk. If you would invest  9,238  in COVANTA HLDG P on December 25, 2024 and sell it today you would lose (589.00) from holding COVANTA HLDG P or give up 6.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

COVANTA HLDG P  vs.  Abcellera Biologics

COVANTA HLDG P

Risk-Adjusted Performance

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 latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for COVANTA HLDG P investors.

Abcellera Biologics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abcellera Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with COVANTA and Abcellera Biologics

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

The idea behind COVANTA HLDG P and Abcellera Biologics 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 CEOs Directory module to screen CEOs from public companies around the world.