Correlation Between Waste Management and CSL

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

By analyzing existing cross correlation between Waste Management and CSL LTD SPONADR, you can compare the effects of market volatilities on Waste Management and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and CSL.

Diversification Opportunities for Waste Management and CSL

-0.43

Correlation Coefficient

Waste Management  CSL

Very good diversification

The 3 months correlation between Waste and CSL is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and CSL LTD SPONADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL LTD SPONADR 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL LTD SPONADR has no effect on the direction of Waste Management i.e., Waste Management and CSL go up and down completely randomly.

Pair Corralation between Waste Management and CSL

Assuming the 90 days trading horizon Waste Management is expected to generate 0.89 times more return on investment than CSL. However, Waste Management is 1.12 times less risky than CSL. It trades about 0.01 of its potential returns per unit of risk. CSL LTD SPONADR is currently generating about -0.03 per unit of risk. If you would invest  19,280  in Waste Management on October 4, 2024 and sell it today you would earn a total of  224.00  from holding Waste Management or generate 1.16% 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.  CSL LTD SPONADR

Waste Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CSL LTD SPONADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL LTD SPONADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, CSL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Waste Management and CSL

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

The idea behind Waste Management and CSL LTD SPONADR 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.