Correlation Between Waste Management and Aqua Metals

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

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

Diversification Opportunities for Waste Management and Aqua Metals

-0.38

Correlation Coefficient

Waste Management  Aqua Metals

Very good diversification

The 3 months correlation between Waste and Aqua is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Aqua Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Metals and Waste Management 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 Management are associated (or correlated) with Aqua Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Metals has no effect on the direction of Waste Management i.e., Waste Management and Aqua Metals go up and down completely randomly.

Pair Corralation between Waste Management and Aqua Metals

If you would invest  19,706  in Waste Management on October 6, 2024 and sell it today you would lose (24.00) from holding Waste Management or give up 0.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Waste Management  vs.  Aqua Metals

Waste Management

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Waste Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aqua Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Waste Management and Aqua Metals

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

The idea behind Waste Management and Aqua Metals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.