Correlation Between Waste Management and YAMAHA MOTOR

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

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

Diversification Opportunities for Waste Management and YAMAHA MOTOR

-0.57

Correlation Coefficient

Waste Management  YAMAHA MOTOR

Excellent diversification

The 3 months correlation between Waste and YAMAHA is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and YAMAHA MOTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YAMAHA MOTOR 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 YAMAHA MOTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YAMAHA MOTOR has no effect on the direction of Waste Management i.e., Waste Management and YAMAHA MOTOR go up and down completely randomly.

Pair Corralation between Waste Management and YAMAHA MOTOR

Assuming the 90 days trading horizon Waste Management is expected to generate 0.72 times more return on investment than YAMAHA MOTOR. However, Waste Management is 1.4 times less risky than YAMAHA MOTOR. It trades about 0.1 of its potential returns per unit of risk. YAMAHA MOTOR is currently generating about -0.11 per unit of risk. If you would invest  19,634  in Waste Management on December 20, 2024 and sell it today you would earn a total of  1,346  from holding Waste Management or generate 6.86% 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.  YAMAHA MOTOR

Waste Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in April 2025.

YAMAHA MOTOR

Risk-Adjusted Performance

Very Weak

Over the last 90 days YAMAHA MOTOR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Waste Management and YAMAHA MOTOR

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

The idea behind Waste Management and YAMAHA MOTOR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.