Correlation Between Waste Management and Carters

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

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

Diversification Opportunities for Waste Management and Carters

-0.21

Correlation Coefficient

Waste Management  Carters

Very good diversification

The 3 months correlation between Waste and Carters is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters 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 Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of Waste Management i.e., Waste Management and Carters go up and down completely randomly.

Pair Corralation between Waste Management and Carters

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.57 times more return on investment than Carters. However, Waste Management is 1.77 times less risky than Carters. It trades about 0.07 of its potential returns per unit of risk. Carters is currently generating about -0.03 per unit of risk. If you would invest  14,788  in Waste Management on October 13, 2024 and sell it today you would earn a total of  5,937  from holding Waste Management or generate 40.15% return on investment over 90 days.

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

Waste Management  vs.  Carters

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Waste Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Waste Management and Carters

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

The idea behind Waste Management and Carters 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.