Correlation Between Waste Management and Stericycle

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

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

Diversification Opportunities for Waste Management and Stericycle

0.0

Correlation Coefficient

Waste Management  Stericycle

Pay attention - limited upside

The 3 months correlation between Waste and Stericycle is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Stericycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stericycle 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 Stericycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stericycle has no effect on the direction of Waste Management i.e., Waste Management and Stericycle go up and down completely randomly.

Pair Corralation between Waste Management and Stericycle

If you would invest  20,152  in Waste Management on December 29, 2024 and sell it today you would earn a total of  2,750  from holding Waste Management or generate 13.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Waste Management  vs.  Stericycle

Waste Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Waste Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Stericycle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stericycle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Stericycle is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Waste Management and Stericycle

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

The idea behind Waste Management and Stericycle 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.