Correlation Between Waste Connections and Cargojet

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

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

Diversification Opportunities for Waste Connections and Cargojet

-0.65

Correlation Coefficient

Waste Connections  Cargojet

Excellent diversification

The 3 months correlation between Waste and Cargojet is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and Cargojet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cargojet and Waste Connections 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 Connections are associated (or correlated) with Cargojet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cargojet has no effect on the direction of Waste Connections i.e., Waste Connections and Cargojet go up and down completely randomly.

Pair Corralation between Waste Connections and Cargojet

Assuming the 90 days trading horizon Waste Connections is expected to generate 0.54 times more return on investment than Cargojet. However, Waste Connections is 1.87 times less risky than Cargojet. It trades about 0.14 of its potential returns per unit of risk. Cargojet is currently generating about -0.05 per unit of risk. If you would invest  25,093  in Waste Connections on September 2, 2024 and sell it today you would earn a total of  2,049  from holding Waste Connections or generate 8.17% return on investment over 90 days.

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

Waste Connections  vs.  Cargojet

Waste Connections

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Waste Connections may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cargojet

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Waste Connections and Cargojet

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

The idea behind Waste Connections and Cargojet 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 Stocks Directory module to find actively traded stocks across global markets.