Correlation Between Waste Management and Gaming

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

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

Diversification Opportunities for Waste Management and Gaming

0.62

Correlation Coefficient

Waste Management  Gaming

Poor diversification

The 3 months correlation between Waste and Gaming is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Gaming and Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming and Leisure 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 Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming and Leisure has no effect on the direction of Waste Management i.e., Waste Management and Gaming go up and down completely randomly.

Pair Corralation between Waste Management and Gaming

Assuming the 90 days trading horizon Waste Management is expected to generate 0.93 times more return on investment than Gaming. However, Waste Management is 1.08 times less risky than Gaming. It trades about 0.08 of its potential returns per unit of risk. Gaming and Leisure is currently generating about 0.02 per unit of risk. If you would invest  13,554  in Waste Management on October 12, 2024 and sell it today you would earn a total of  6,661  from holding Waste Management or generate 49.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Waste Management  vs.  Gaming and Leisure

Waste Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 3 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Gaming and Leisure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaming and Leisure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gaming is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Waste Management and Gaming

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

The idea behind Waste Management and Gaming and Leisure 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.