Correlation Between Waste Management and COMMERCIAL VEHICLE

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

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

Diversification Opportunities for Waste Management and COMMERCIAL VEHICLE

-0.8

Correlation Coefficient

Waste Management  COMMERCIAL VEHICLE

Pay attention - limited upside

The 3 months correlation between Waste and COMMERCIAL is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of Waste Management i.e., Waste Management and COMMERCIAL VEHICLE go up and down completely randomly.

Pair Corralation between Waste Management and COMMERCIAL VEHICLE

Assuming the 90 days trading horizon Waste Management is expected to generate 0.19 times more return on investment than COMMERCIAL VEHICLE. However, Waste Management is 5.4 times less risky than COMMERCIAL VEHICLE. It trades about -0.5 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.17 per unit of risk. If you would invest  21,394  in Waste Management on September 23, 2024 and sell it today you would lose (1,688) from holding Waste Management or give up 7.89% of portfolio value over 90 days.

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

Waste Management  vs.  COMMERCIAL VEHICLE

Waste Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in January 2025.

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Waste Management and COMMERCIAL VEHICLE

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

The idea behind Waste Management and COMMERCIAL VEHICLE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.