Correlation Between Waste Connections and Casella Waste

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

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

Diversification Opportunities for Waste Connections and Casella Waste

0.39

Correlation Coefficient

Waste Connections  Casella Waste

Weak diversification

The 3 months correlation between Waste and Casella is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and Casella Waste Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casella Waste 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 Casella Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casella Waste Systems has no effect on the direction of Waste Connections i.e., Waste Connections and Casella Waste go up and down completely randomly.

Pair Corralation between Waste Connections and Casella Waste

Considering the 90-day investment horizon Waste Connections is expected to generate 0.62 times more return on investment than Casella Waste. However, Waste Connections is 1.62 times less risky than Casella Waste. It trades about 0.2 of its potential returns per unit of risk. Casella Waste Systems is currently generating about 0.06 per unit of risk. If you would invest  17,088  in Waste Connections on December 28, 2024 and sell it today you would earn a total of  2,195  from holding Waste Connections or generate 12.85% 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.  Casella Waste Systems

Waste Connections

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Waste Connections displayed solid returns over the last few months and may actually be approaching a breakup point.

Casella Waste Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Waste Connections and Casella Waste

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

The idea behind Waste Connections and Casella Waste 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.