Correlation Between Waste Management and Barclays PLC

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

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

Diversification Opportunities for Waste Management and Barclays PLC

0.84

Correlation Coefficient

Waste Management  Barclays PLC

Very poor diversification

The 3 months correlation between Waste and Barclays is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Barclays PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC 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 Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC has no effect on the direction of Waste Management i.e., Waste Management and Barclays PLC go up and down completely randomly.

Pair Corralation between Waste Management and Barclays PLC

Assuming the 90 days trading horizon Waste Management is expected to under-perform the Barclays PLC. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 2.17 times less risky than Barclays PLC. The stock trades about -0.42 of its potential returns per unit of risk. The Barclays PLC is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8,240  in Barclays PLC on October 8, 2024 and sell it today you would lose (110.00) from holding Barclays PLC or give up 1.33% of portfolio value over 90 days.

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

Waste Management  vs.  Barclays PLC

Waste Management

Risk-Adjusted Performance

7 of 100

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. Despite somewhat weak primary indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Barclays PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Barclays PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waste Management and Barclays PLC

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

The idea behind Waste Management and Barclays PLC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.