Correlation Between United States and Republic Services

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

By analyzing existing cross correlation between United States Steel and Republic Services, you can compare the effects of market volatilities on United States and Republic Services 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 United States with a short position of Republic Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Republic Services.

Diversification Opportunities for United States and Republic Services

0.49

Correlation Coefficient

United States  Republic Services

Very weak diversification

The 3 months correlation between United and Republic is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Republic Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic Services and United States 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 United States Steel are associated (or correlated) with Republic Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Republic Services has no effect on the direction of United States i.e., United States and Republic Services go up and down completely randomly.

Pair Corralation between United States and Republic Services

Assuming the 90 days trading horizon United States is expected to generate 1.52 times less return on investment than Republic Services. In addition to that, United States is 2.51 times more volatile than Republic Services. It trades about 0.02 of its total potential returns per unit of risk. Republic Services is currently generating about 0.09 per unit of volatility. If you would invest  11,798  in Republic Services on September 29, 2024 and sell it today you would earn a total of  7,787  from holding Republic Services or generate 66.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

United States Steel  vs.  Republic Services

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Republic Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Republic Services may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United States and Republic Services

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

The idea behind United States Steel and Republic Services 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.