Correlation Between Waste Connections and Houston Natural

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

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

Diversification Opportunities for Waste Connections and Houston Natural

-0.55

Correlation Coefficient

Waste Connections  Houston Natural

Excellent diversification

The 3 months correlation between Waste and Houston is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and Houston Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houston Natural Resources 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 Houston Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Houston Natural Resources has no effect on the direction of Waste Connections i.e., Waste Connections and Houston Natural go up and down completely randomly.

Pair Corralation between Waste Connections and Houston Natural

Considering the 90-day investment horizon Waste Connections is expected to generate 0.11 times more return on investment than Houston Natural. However, Waste Connections is 9.32 times less risky than Houston Natural. It trades about 0.22 of its potential returns per unit of risk. Houston Natural Resources is currently generating about 0.0 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  2,303  from holding Waste Connections or generate 13.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	33.33%
Values	Daily Returns

Waste Connections  vs.  Houston Natural Resources

Waste Connections

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 16 (%) 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.

Houston Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Houston Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Houston Natural is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Waste Connections and Houston Natural

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

The idea behind Waste Connections and Houston Natural Resources 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.