Correlation Between Waste Management and Bread Financial

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

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

Diversification Opportunities for Waste Management and Bread Financial

-0.35

Correlation Coefficient

Waste Management  Bread Financial

Very good diversification

The 3 months correlation between Waste and Bread is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings 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 Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of Waste Management i.e., Waste Management and Bread Financial go up and down completely randomly.

Pair Corralation between Waste Management and Bread Financial

Assuming the 90 days trading horizon Waste Management is expected to generate 0.36 times more return on investment than Bread Financial. However, Waste Management is 2.76 times less risky than Bread Financial. It trades about 0.07 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about -0.14 per unit of risk. If you would invest  62,353  in Waste Management on December 30, 2024 and sell it today you would earn a total of  2,648  from holding Waste Management or generate 4.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Waste Management  vs.  Bread Financial Holdings

Waste Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Waste Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bread Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bread Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Waste Management and Bread Financial

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

The idea behind Waste Management and Bread Financial Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.