Correlation Between Waste Management and XCHG Limited

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

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

Diversification Opportunities for Waste Management and XCHG Limited

0.53

Correlation Coefficient

Waste Management  XCHG Limited

Very weak diversification

The 3 months correlation between Waste and XCHG is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and XCHG Limited American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XCHG Limited American 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 XCHG Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XCHG Limited American has no effect on the direction of Waste Management i.e., Waste Management and XCHG Limited go up and down completely randomly.

Pair Corralation between Waste Management and XCHG Limited

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.07 times more return on investment than XCHG Limited. However, Waste Management is 13.82 times less risky than XCHG Limited. It trades about 0.04 of its potential returns per unit of risk. XCHG Limited American is currently generating about -0.16 per unit of risk. If you would invest  20,611  in Waste Management on October 25, 2024 and sell it today you would earn a total of  533.00  from holding Waste Management or generate 2.59% return on investment over 90 days.

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

Waste Management  vs.  XCHG Limited American

Waste Management

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 3 (%) 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.

XCHG Limited American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XCHG Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Waste Management and XCHG Limited

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

The idea behind Waste Management and XCHG Limited American 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.