Correlation Between Veralto and Casella Waste

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

By analyzing existing cross correlation between Veralto and Casella Waste Systems, you can compare the effects of market volatilities on Veralto and Casella Waste 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 Veralto with a short position of Casella Waste. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veralto and Casella Waste.

Diversification Opportunities for Veralto and Casella Waste

-0.31

Correlation Coefficient

Veralto  Casella Waste

Very good diversification

The 3 months correlation between Veralto and Casella is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Veralto and Casella Waste Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casella Waste Systems and Veralto 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 Veralto are associated (or correlated) with Casella Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casella Waste Systems has no effect on the direction of Veralto i.e., Veralto and Casella Waste go up and down completely randomly.

Pair Corralation between Veralto and Casella Waste

Given the investment horizon of 90 days Veralto is expected to under-perform the Casella Waste. But the stock apears to be less risky and, when comparing its historical volatility, Veralto is 1.45 times less risky than Casella Waste. The stock trades about -0.06 of its potential returns per unit of risk. The Casella Waste Systems is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,806  in Casella Waste Systems on September 13, 2024 and sell it today you would earn a total of  205.00  from holding Casella Waste Systems or generate 1.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Veralto  vs.  Casella Waste Systems

Veralto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veralto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Veralto is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Casella Waste Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Veralto and Casella Waste

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

The idea behind Veralto and Casella Waste Systems 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.