Correlation Between Waste Connections and CRA International

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

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

Diversification Opportunities for Waste Connections and CRA International

0.45

Correlation Coefficient

Waste Connections  CRA International

Very weak diversification

The 3 months correlation between Waste and CRA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and CRA International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRA International 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 CRA International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRA International has no effect on the direction of Waste Connections i.e., Waste Connections and CRA International go up and down completely randomly.

Pair Corralation between Waste Connections and CRA International

Considering the 90-day investment horizon Waste Connections is expected to under-perform the CRA International. But the stock apears to be less risky and, when comparing its historical volatility, Waste Connections is 2.65 times less risky than CRA International. The stock trades about -0.02 of its potential returns per unit of risk. The CRA International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  19,503  in CRA International on November 28, 2024 and sell it today you would lose (44.00) from holding CRA International or give up 0.23% of portfolio value over 90 days.

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

Waste Connections  vs.  CRA International

Waste Connections

Risk-Adjusted Performance

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.

CRA International

Risk-Adjusted Performance

Weak

Over the last 90 days CRA International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CRA International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Waste Connections and CRA International

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

The idea behind Waste Connections and CRA International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.