Correlation Between Waste Management and Republic Services

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

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

Diversification Opportunities for Waste Management and Republic Services

0.9

Correlation Coefficient

Waste Management  Republic Services

Almost no diversification

The 3 months correlation between Waste and Republic is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Republic Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic Services 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 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 Waste Management i.e., Waste Management and Republic Services go up and down completely randomly.

Pair Corralation between Waste Management and Republic Services

Assuming the 90 days horizon Waste Management is expected to generate 1.26 times less return on investment than Republic Services. But when comparing it to its historical volatility, Waste Management is 1.11 times less risky than Republic Services. It trades about 0.14 of its potential returns per unit of risk. Republic Services is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  19,367  in Republic Services on December 29, 2024 and sell it today you would earn a total of  2,573  from holding Republic Services or generate 13.29% return on investment over 90 days.

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

Waste Management  vs.  Republic Services

Waste Management

Risk-Adjusted Performance

OK

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

Republic Services

Risk-Adjusted Performance

Good

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

Pair Trading with Waste Management and Republic Services

The main advantage of trading using opposite Waste Management and Republic Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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 Waste Management 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.