Correlation Between Waste Management and Healthpeak Properties

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

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

Diversification Opportunities for Waste Management and Healthpeak Properties

0.86

Correlation Coefficient

Waste Management  Healthpeak Properties

Very poor diversification

The 3 months correlation between Waste and Healthpeak is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Healthpeak Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthpeak Properties 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 Healthpeak Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthpeak Properties has no effect on the direction of Waste Management i.e., Waste Management and Healthpeak Properties go up and down completely randomly.

Pair Corralation between Waste Management and Healthpeak Properties

Assuming the 90 days trading horizon Waste Management is expected to generate 1.51 times less return on investment than Healthpeak Properties. In addition to that, Waste Management is 1.02 times more volatile than Healthpeak Properties. It trades about 0.12 of its total potential returns per unit of risk. Healthpeak Properties is currently generating about 0.19 per unit of volatility. If you would invest  9,339  in Healthpeak Properties on September 3, 2024 and sell it today you would earn a total of  3,973  from holding Healthpeak Properties or generate 42.54% return on investment over 90 days.

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

Waste Management  vs.  Healthpeak Properties

Waste Management

Risk-Adjusted Performance

13 of 100

Good

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

Healthpeak Properties

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Healthpeak Properties are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Healthpeak Properties 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 Healthpeak Properties

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

The idea behind Waste Management and Healthpeak Properties 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.