Correlation Between Advance Auto and Waste Management
Can any of the company-specific risk be diversified away by investing in both Advance Auto and Waste Management 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 Advance Auto and Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and Waste Management, you can compare the effects of market volatilities on Advance Auto and Waste Management 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 Advance Auto with a short position of Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Waste Management.
Diversification Opportunities for Advance Auto and Waste Management
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advance and Waste is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Advance Auto 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 Advance Auto Parts are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Advance Auto i.e., Advance Auto and Waste Management go up and down completely randomly.
Pair Corralation between Advance Auto and Waste Management
Assuming the 90 days trading horizon Advance Auto Parts is expected to generate 2.86 times more return on investment than Waste Management. However, Advance Auto is 2.86 times more volatile than Waste Management. It trades about 0.27 of its potential returns per unit of risk. Waste Management is currently generating about 0.39 per unit of risk. If you would invest 1,353 in Advance Auto Parts on September 4, 2024 and sell it today you would earn a total of 273.00 from holding Advance Auto Parts or generate 20.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advance Auto Parts vs. Waste Management
Performance |
| Timeline |
| Advance Auto Parts |
| Waste Management |
Advance Auto and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and Waste Management
The main advantage of trading using opposite Advance Auto and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.| Advance Auto vs. Micron Technology | Advance Auto vs. SVB Financial Group | Advance Auto vs. Metalrgica Riosulense SA | Advance Auto vs. MAHLE Metal Leve |
| Waste Management vs. Orizon Valorizao de | Waste Management vs. Ambipar Participaes e | Waste Management vs. Unipar Carbocloro SA | Waste Management vs. Cognizant Technology Solutions |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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