Correlation Between Waste Management and Oatly Group

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

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

Diversification Opportunities for Waste Management and Oatly Group

0.16

Correlation Coefficient

Waste Management  Oatly Group

Average diversification

The 3 months correlation between Waste and Oatly is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Oatly Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oatly Group AB 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 Oatly Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oatly Group AB has no effect on the direction of Waste Management i.e., Waste Management and Oatly Group go up and down completely randomly.

Pair Corralation between Waste Management and Oatly Group

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.24 times more return on investment than Oatly Group. However, Waste Management is 4.21 times less risky than Oatly Group. It trades about 0.03 of its potential returns per unit of risk. Oatly Group AB is currently generating about -0.03 per unit of risk. If you would invest  20,821  in Waste Management on October 24, 2024 and sell it today you would earn a total of  316.00  from holding Waste Management or generate 1.52% 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.  Oatly Group AB

Waste Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 2 (%) 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.

Oatly Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Waste Management and Oatly Group

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

The idea behind Waste Management and Oatly Group AB 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.