Correlation Between Waste Connections and Cass Information

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

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

Diversification Opportunities for Waste Connections and Cass Information

0.69

Correlation Coefficient

Waste Connections  Cass Information

Poor diversification

The 3 months correlation between Waste and Cass is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems 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 Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Waste Connections i.e., Waste Connections and Cass Information go up and down completely randomly.

Pair Corralation between Waste Connections and Cass Information

Considering the 90-day investment horizon Waste Connections is expected to under-perform the Cass Information. But the stock apears to be less risky and, when comparing its historical volatility, Waste Connections is 1.43 times less risky than Cass Information. The stock trades about -0.62 of its potential returns per unit of risk. The Cass Information Systems is currently generating about -0.39 of returns per unit of risk over similar time horizon. If you would invest  4,372  in Cass Information Systems on October 6, 2024 and sell it today you would lose (403.00) from holding Cass Information Systems or give up 9.22% of portfolio value over 90 days.

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

Waste Connections  vs.  Cass Information Systems

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 fundamental indicators, Waste Connections is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cass Information Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cass Information Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cass Information is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Waste Connections and Cass Information

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

The idea behind Waste Connections and Cass Information Systems 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.