Correlation Between Waste Management and Exponent

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

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

Diversification Opportunities for Waste Management and Exponent

0.08

Correlation Coefficient

Waste Management  Exponent

Significant diversification

The 3 months correlation between Waste and Exponent is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Exponent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exponent 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 Exponent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exponent has no effect on the direction of Waste Management i.e., Waste Management and Exponent go up and down completely randomly.

Pair Corralation between Waste Management and Exponent

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.97 times more return on investment than Exponent. However, Waste Management is 1.04 times less risky than Exponent. It trades about 0.06 of its potential returns per unit of risk. Exponent is currently generating about -0.2 per unit of risk. If you would invest  22,437  in Waste Management on December 2, 2024 and sell it today you would earn a total of  841.00  from holding Waste Management or generate 3.75% 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.  Exponent

Waste Management

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Exponent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Waste Management and Exponent

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

The idea behind Waste Management and Exponent 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.