Correlation Between Waste Management and CRA International

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

By analyzing existing cross correlation between Waste Management and CRA International, you can compare the effects of market volatilities on Waste Management and CRA International 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 Management with a short position of CRA International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and CRA International.

Diversification Opportunities for Waste Management and CRA International

0.16

Correlation Coefficient

Waste Management  CRA International

Average diversification

The 3 months correlation between Waste and CRA is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and CRA International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRA International and Waste Management 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 Management are associated (or correlated) with CRA International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRA International has no effect on the direction of Waste Management i.e., Waste Management and CRA International go up and down completely randomly.

Pair Corralation between Waste Management and CRA International

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.47 times more return on investment than CRA International. However, Waste Management is 2.11 times less risky than CRA International. It trades about 0.16 of its potential returns per unit of risk. CRA International is currently generating about -0.02 per unit of risk. If you would invest  20,426  in Waste Management on December 26, 2024 and sell it today you would earn a total of  2,281  from holding Waste Management or generate 11.17% return on investment over 90 days.

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

Waste Management  vs.  CRA International

Waste Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CRA International

Risk-Adjusted Performance

Very Weak

Over the last 90 days CRA International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CRA International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Waste Management and CRA International

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

The idea behind Waste Management and CRA International 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.