Correlation Between Waste Connections and Cleanaway Waste

Can any of the company-specific risk be diversified away by investing in both Waste Connections and Cleanaway 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 Cleanaway 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 Cleanaway Waste Management, you can compare the effects of market volatilities on Waste Connections and Cleanaway 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 Cleanaway Waste. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Connections and Cleanaway Waste.

Diversification Opportunities for Waste Connections and Cleanaway Waste

-0.03

Correlation Coefficient

Waste Connections  Cleanaway Waste

Good diversification

The 3 months correlation between Waste and Cleanaway is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and Cleanaway Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway Waste Mana 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 Cleanaway Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway Waste Mana has no effect on the direction of Waste Connections i.e., Waste Connections and Cleanaway Waste go up and down completely randomly.

Pair Corralation between Waste Connections and Cleanaway Waste

Considering the 90-day investment horizon Waste Connections is expected to generate 0.13 times more return on investment than Cleanaway Waste. However, Waste Connections is 7.62 times less risky than Cleanaway Waste. It trades about 0.2 of its potential returns per unit of risk. Cleanaway Waste Management is currently generating about 0.01 per unit of risk. If you would invest  17,088  in Waste Connections on December 29, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Waste Connections  vs.  Cleanaway Waste Management

Waste Connections

Risk-Adjusted Performance

Good

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.

Cleanaway Waste Mana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cleanaway Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Cleanaway Waste is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Waste Connections and Cleanaway Waste

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

The idea behind Waste Connections and Cleanaway Waste Management 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.