Correlation Between Waste Management and Japan Asia

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

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

Diversification Opportunities for Waste Management and Japan Asia

0.39

Correlation Coefficient

Waste Management  Japan Asia

Weak diversification

The 3 months correlation between Waste and Japan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment 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 Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of Waste Management i.e., Waste Management and Japan Asia go up and down completely randomly.

Pair Corralation between Waste Management and Japan Asia

Assuming the 90 days trading horizon Waste Management is expected to generate 1.4 times less return on investment than Japan Asia. But when comparing it to its historical volatility, Waste Management is 3.18 times less risky than Japan Asia. It trades about 0.02 of its potential returns per unit of risk. Japan Asia Investment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Japan Asia Investment on September 27, 2024 and sell it today you would lose (11.00) from holding Japan Asia Investment or give up 8.27% of portfolio value over 90 days.

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

Waste Management  vs.  Japan Asia Investment

Waste Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Waste Management and Japan Asia

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

The idea behind Waste Management and Japan Asia Investment 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.