Correlation Between Waste Management and Credit Acceptance

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

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

Diversification Opportunities for Waste Management and Credit Acceptance

0.0

Correlation Coefficient

Waste Management  Credit Acceptance

Pay attention - limited upside

The 3 months correlation between Waste and Credit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Waste Management i.e., Waste Management and Credit Acceptance go up and down completely randomly.

Pair Corralation between Waste Management and Credit Acceptance

If you would invest  68,095  in Waste Management on December 2, 2024 and sell it today you would lose (203.00) from holding Waste Management or give up 0.3% of portfolio value over 90 days.

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

Waste Management  vs.  Credit Acceptance

Waste Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Credit Acceptance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Credit Acceptance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Waste Management and Credit Acceptance

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

The idea behind Waste Management and Credit Acceptance 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.