Correlation Between Waste Connections and SMX Public

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

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

Diversification Opportunities for Waste Connections and SMX Public

-0.05

Correlation Coefficient

Waste Connections  SMX Public

Good diversification

The 3 months correlation between Waste and SMX is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and SMX Public Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMX Public Limited 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 SMX Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMX Public Limited has no effect on the direction of Waste Connections i.e., Waste Connections and SMX Public go up and down completely randomly.

Pair Corralation between Waste Connections and SMX Public

Considering the 90-day investment horizon Waste Connections is expected to generate 17.19 times less return on investment than SMX Public. But when comparing it to its historical volatility, Waste Connections is 50.56 times less risky than SMX Public. It trades about 0.29 of its potential returns per unit of risk. SMX Public Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  629.00  in SMX Public Limited on October 22, 2024 and sell it today you would lose (93.00) from holding SMX Public Limited or give up 14.79% 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.  SMX Public Limited

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.

SMX Public Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMX Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Waste Connections and SMX Public

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

The idea behind Waste Connections and SMX Public Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.