Correlation Between Waste Management and Kite Realty

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

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

Diversification Opportunities for Waste Management and Kite Realty

0.92

Correlation Coefficient

Waste Management  Kite Realty

Almost no diversification

The 3 months correlation between Waste and Kite is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Kite Realty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kite Realty Group 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 Kite Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kite Realty Group has no effect on the direction of Waste Management i.e., Waste Management and Kite Realty go up and down completely randomly.

Pair Corralation between Waste Management and Kite Realty

Allowing for the 90-day total investment horizon Waste Management is expected to under-perform the Kite Realty. In addition to that, Waste Management is 1.01 times more volatile than Kite Realty Group. It trades about -0.01 of its total potential returns per unit of risk. Kite Realty Group is currently generating about 0.1 per unit of volatility. If you would invest  2,154  in Kite Realty Group on October 7, 2024 and sell it today you would earn a total of  351.00  from holding Kite Realty Group or generate 16.3% return on investment over 90 days.

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

Waste Management  vs.  Kite Realty Group

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.

Kite Realty Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Waste Management and Kite Realty

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

The idea behind Waste Management and Kite Realty Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.