Correlation Between Waste Management and UNITED UTILITIES

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

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

Diversification Opportunities for Waste Management and UNITED UTILITIES

-0.34

Correlation Coefficient

Waste Management  UNITED UTILITIES

Very good diversification

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

Pair Corralation between Waste Management and UNITED UTILITIES

Assuming the 90 days trading horizon Waste Management is expected to generate 0.76 times more return on investment than UNITED UTILITIES. However, Waste Management is 1.31 times less risky than UNITED UTILITIES. It trades about 0.13 of its potential returns per unit of risk. UNITED UTILITIES GR is currently generating about -0.08 per unit of risk. If you would invest  19,370  in Waste Management on December 28, 2024 and sell it today you would earn a total of  1,845  from holding Waste Management or generate 9.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Waste Management  vs.  UNITED UTILITIES GR

Waste Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 9 (%) 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 April 2025.

UNITED UTILITIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days UNITED UTILITIES GR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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 UNITED UTILITIES

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

The idea behind Waste Management and UNITED UTILITIES GR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.