Correlation Between TRAVEL + and Waste Connections

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Waste Connections, you can compare the effects of market volatilities on TRAVEL + and Waste Connections 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 TRAVEL + with a short position of Waste Connections. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and Waste Connections.

Diversification Opportunities for TRAVEL + and Waste Connections

0.57

Correlation Coefficient

TRAVEL +  Waste Connections

Very weak diversification

The 3 months correlation between TRAVEL and Waste is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Waste Connections in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Connections and TRAVEL + 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 TRAVEL LEISURE DL 01 are associated (or correlated) with Waste Connections. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Connections has no effect on the direction of TRAVEL + i.e., TRAVEL + and Waste Connections go up and down completely randomly.

Pair Corralation between TRAVEL + and Waste Connections

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to under-perform the Waste Connections. In addition to that, TRAVEL + is 1.65 times more volatile than Waste Connections. It trades about -0.05 of its total potential returns per unit of risk. Waste Connections is currently generating about 0.08 per unit of volatility. If you would invest  16,688  in Waste Connections on December 27, 2024 and sell it today you would earn a total of  952.00  from holding Waste Connections or generate 5.7% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Waste Connections

TRAVEL LEISURE DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TRAVEL + is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Waste Connections

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Waste Connections is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAVEL + and Waste Connections

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

The idea behind TRAVEL LEISURE DL 01 and Waste Connections 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.