Correlation Between Waste Management and HOYA
Can any of the company-specific risk be diversified away by investing in both Waste Management and HOYA 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 HOYA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and HOYA Corporation, you can compare the effects of market volatilities on Waste Management and HOYA 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 HOYA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and HOYA.
Diversification Opportunities for Waste Management and HOYA
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Waste and HOYA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and HOYA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOYA 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 HOYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOYA has no effect on the direction of Waste Management i.e., Waste Management and HOYA go up and down completely randomly.
Pair Corralation between Waste Management and HOYA
Assuming the 90 days trading horizon Waste Management is expected to generate 4.01 times less return on investment than HOYA. But when comparing it to its historical volatility, Waste Management is 5.42 times less risky than HOYA. It trades about 0.18 of its potential returns per unit of risk. HOYA Corporation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,816 in HOYA Corporation on September 5, 2024 and sell it today you would earn a total of 4,834 from holding HOYA Corporation or generate 61.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.46% |
Values | Daily Returns |
Waste Management vs. HOYA Corp.
Performance |
Timeline |
Waste Management |
HOYA |
Waste Management and HOYA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Waste Management and HOYA
The main advantage of trading using opposite Waste Management and HOYA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, HOYA 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 HOYA will offset losses from the drop in HOYA's long position.Waste Management vs. TOTAL GABON | Waste Management vs. Walgreens Boots Alliance | Waste Management vs. Peak Resources Limited |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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