Correlation Between Waste Management and Casella Waste

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

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

Diversification Opportunities for Waste Management and Casella Waste

0.59

Correlation Coefficient

Waste Management  Casella Waste

Very weak diversification

The 3 months correlation between Waste and Casella is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Casella Waste Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casella Waste Systems 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 Casella Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casella Waste Systems has no effect on the direction of Waste Management i.e., Waste Management and Casella Waste go up and down completely randomly.

Pair Corralation between Waste Management and Casella Waste

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.72 times more return on investment than Casella Waste. However, Waste Management is 1.39 times less risky than Casella Waste. It trades about 0.19 of its potential returns per unit of risk. Casella Waste Systems is currently generating about 0.06 per unit of risk. If you would invest  20,152  in Waste Management on December 28, 2024 and sell it today you would earn a total of  2,750  from holding Waste Management or generate 13.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Waste Management  vs.  Casella Waste Systems

Waste Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Waste Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Casella Waste Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Waste Management and Casella Waste

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

The idea behind Waste Management and Casella Waste Systems 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.