Correlation Between Waste Management and Susglobal Energy

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

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

Diversification Opportunities for Waste Management and Susglobal Energy

-0.19

Correlation Coefficient

Waste Management  Susglobal Energy

Good diversification

The 3 months correlation between Waste and Susglobal is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Susglobal Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Susglobal Energy Corp 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 Susglobal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Susglobal Energy Corp has no effect on the direction of Waste Management i.e., Waste Management and Susglobal Energy go up and down completely randomly.

Pair Corralation between Waste Management and Susglobal Energy

Allowing for the 90-day total investment horizon Waste Management is expected to generate 2.62 times less return on investment than Susglobal Energy. But when comparing it to its historical volatility, Waste Management is 12.67 times less risky than Susglobal Energy. It trades about 0.06 of its potential returns per unit of risk. Susglobal Energy Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Susglobal Energy Corp on October 3, 2024 and sell it today you would lose (30.15) from holding Susglobal Energy Corp or give up 94.22% of portfolio value over 90 days.

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

Waste Management  vs.  Susglobal Energy Corp

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.

Susglobal Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Waste Management and Susglobal Energy

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

The idea behind Waste Management and Susglobal Energy Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.