Correlation Between Waste Connections and Wescan Goldfields

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

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

Diversification Opportunities for Waste Connections and Wescan Goldfields

0.38

Correlation Coefficient

Waste Connections  Wescan Goldfields

Weak diversification

The 3 months correlation between Waste and Wescan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and Wescan Goldfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wescan Goldfields 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 Wescan Goldfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wescan Goldfields has no effect on the direction of Waste Connections i.e., Waste Connections and Wescan Goldfields go up and down completely randomly.

Pair Corralation between Waste Connections and Wescan Goldfields

Assuming the 90 days trading horizon Waste Connections is expected to generate 13.56 times less return on investment than Wescan Goldfields. But when comparing it to its historical volatility, Waste Connections is 17.32 times less risky than Wescan Goldfields. It trades about 0.19 of its potential returns per unit of risk. Wescan Goldfields is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Wescan Goldfields on December 28, 2024 and sell it today you would earn a total of  3.00  from holding Wescan Goldfields or generate 150.0% return on investment over 90 days.

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

Waste Connections  vs.  Wescan Goldfields

Waste Connections

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Waste Connections displayed solid returns over the last few months and may actually be approaching a breakup point.

Wescan Goldfields

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wescan Goldfields are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Wescan Goldfields showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waste Connections and Wescan Goldfields

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

The idea behind Waste Connections and Wescan Goldfields 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.