Correlation Between Waste Management and ManpowerGroup

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

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

Diversification Opportunities for Waste Management and ManpowerGroup

-0.7

Correlation Coefficient

Waste Management  ManpowerGroup

Excellent diversification

The 3 months correlation between Waste and ManpowerGroup is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and ManpowerGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ManpowerGroup 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 ManpowerGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ManpowerGroup has no effect on the direction of Waste Management i.e., Waste Management and ManpowerGroup go up and down completely randomly.

Pair Corralation between Waste Management and ManpowerGroup

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.56 times more return on investment than ManpowerGroup. However, Waste Management is 1.78 times less risky than ManpowerGroup. It trades about 0.13 of its potential returns per unit of risk. ManpowerGroup is currently generating about -0.08 per unit of risk. If you would invest  20,864  in Waste Management on September 1, 2024 and sell it today you would earn a total of  1,958  from holding Waste Management or generate 9.38% return on investment over 90 days.

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

Waste Management  vs.  ManpowerGroup

Waste Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ManpowerGroup

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ManpowerGroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Waste Management and ManpowerGroup

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

The idea behind Waste Management and ManpowerGroup 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.