Correlation Between Waste Management and Lake Resources

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

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

Diversification Opportunities for Waste Management and Lake Resources

-0.49

Correlation Coefficient

Waste Management  Lake Resources

Very good diversification

The 3 months correlation between Waste and Lake is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL 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 Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of Waste Management i.e., Waste Management and Lake Resources go up and down completely randomly.

Pair Corralation between Waste Management and Lake Resources

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.14 times more return on investment than Lake Resources. However, Waste Management is 6.91 times less risky than Lake Resources. It trades about 0.17 of its potential returns per unit of risk. Lake Resources NL 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  2,466  from holding Waste Management or generate 12.07% return on investment over 90 days.

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

Waste Management  vs.  Lake Resources NL

Waste Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 13 (%) 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.

Lake Resources NL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Resources NL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Lake Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Waste Management and Lake Resources

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

The idea behind Waste Management and Lake Resources NL 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.