Correlation Between Waste Connections and Willow Biosciences

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

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

Diversification Opportunities for Waste Connections and Willow Biosciences

-0.24

Correlation Coefficient

Waste Connections  Willow Biosciences

Very good diversification

The 3 months correlation between Waste and Willow is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and Willow Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willow Biosciences 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 Willow Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willow Biosciences has no effect on the direction of Waste Connections i.e., Waste Connections and Willow Biosciences go up and down completely randomly.

Pair Corralation between Waste Connections and Willow Biosciences

Assuming the 90 days trading horizon Waste Connections is expected to under-perform the Willow Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Waste Connections is 9.21 times less risky than Willow Biosciences. The stock trades about -0.4 of its potential returns per unit of risk. The Willow Biosciences is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  7.50  in Willow Biosciences on October 10, 2024 and sell it today you would lose (0.50) from holding Willow Biosciences or give up 6.67% of portfolio value over 90 days.

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

Waste Connections  vs.  Willow Biosciences

Waste Connections

Risk-Adjusted Performance

0 of 100

Very Weak

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

Willow Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willow Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Waste Connections and Willow Biosciences

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

The idea behind Waste Connections and Willow Biosciences 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.