Correlation Between Waste Management and Fresenius Medical

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

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

Diversification Opportunities for Waste Management and Fresenius Medical

0.34

Correlation Coefficient

Waste Management  Fresenius Medical

Weak diversification

The 3 months correlation between Waste and Fresenius is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Waste Management i.e., Waste Management and Fresenius Medical go up and down completely randomly.

Pair Corralation between Waste Management and Fresenius Medical

Assuming the 90 days trading horizon Waste Management is expected to generate 0.72 times more return on investment than Fresenius Medical. However, Waste Management is 1.39 times less risky than Fresenius Medical. It trades about 0.07 of its potential returns per unit of risk. Fresenius Medical Care is currently generating about 0.04 per unit of risk. If you would invest  19,763  in Waste Management on December 23, 2024 and sell it today you would earn a total of  982.00  from holding Waste Management or generate 4.97% return on investment over 90 days.

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

Waste Management  vs.  Fresenius Medical Care

Waste Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 5 (%) 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.

Fresenius Medical Care

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fresenius Medical 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 Fresenius Medical

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

The idea behind Waste Management and Fresenius Medical Care 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.