Correlation Between Waste Management and Umicore SA

Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Management 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 Management and Umicore SA, you can compare the effects of market volatilities on Waste Management 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 Management with a short position of Umicore SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Umicore SA.

Diversification Opportunities for Waste Management and Umicore SA

-0.43

Correlation Coefficient

Waste Management  Umicore SA

Very good diversification

The 3 months correlation between Waste and Umicore is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Umicore SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umicore SA 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 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 Management i.e., Waste Management and Umicore SA go up and down completely randomly.

Pair Corralation between Waste Management and Umicore SA

Assuming the 90 days horizon Waste Management is expected to generate 0.53 times more return on investment than Umicore SA. However, Waste Management is 1.89 times less risky than Umicore SA. It trades about 0.1 of its potential returns per unit of risk. Umicore SA is currently generating about -0.12 per unit of risk. If you would invest  15,928  in Waste Management on September 4, 2024 and sell it today you would earn a total of  5,457  from holding Waste Management or generate 34.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Waste Management  vs.  Umicore SA

Waste Management

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Waste Management reported solid returns over the last few months and may actually be approaching a breakup point.

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 Management and Umicore SA

The main advantage of trading using opposite Waste Management and Umicore SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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 Management 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.