Correlation Between Waste Management and Ashtead Group
Can any of the company-specific risk be diversified away by investing in both Waste Management and Ashtead 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 Ashtead 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 Ashtead Group PLC, you can compare the effects of market volatilities on Waste Management and Ashtead 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 Ashtead Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Ashtead Group.
Diversification Opportunities for Waste Management and Ashtead Group
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Waste and Ashtead is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Ashtead Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Group PLC 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 Ashtead Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Group PLC has no effect on the direction of Waste Management i.e., Waste Management and Ashtead Group go up and down completely randomly.
Pair Corralation between Waste Management and Ashtead Group
Assuming the 90 days trading horizon Waste Management is expected to generate 0.21 times more return on investment than Ashtead Group. However, Waste Management is 4.84 times less risky than Ashtead Group. It trades about -0.59 of its potential returns per unit of risk. Ashtead Group PLC is currently generating about -0.33 per unit of risk. If you would invest 21,764 in Waste Management on October 9, 2024 and sell it today you would lose (1,661) from holding Waste Management or give up 7.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Waste Management vs. Ashtead Group PLC
Performance |
| Timeline |
| Waste Management |
| Ashtead Group PLC |
Waste Management and Ashtead Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Ashtead Group
The main advantage of trading using opposite Waste Management and Ashtead Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, Ashtead 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 Ashtead Group will offset losses from the drop in Ashtead Group's long position.| Waste Management vs. Check Point Software | Waste Management vs. Impax Asset Management | Waste Management vs. Atalaya Mining | Waste Management vs. Technicolor |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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