Correlation Between Associated British and Waste Management
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Waste Management, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Waste Management.
Diversification Opportunities for Associated British and Waste Management
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Waste is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Waste Management go up and down completely randomly.
Pair Corralation between Associated British and Waste Management
Assuming the 90 days trading horizon Associated British is expected to generate 1.5 times less return on investment than Waste Management. In addition to that, Associated British is 1.23 times more volatile than Waste Management. It trades about 0.05 of its total potential returns per unit of risk. Waste Management is currently generating about 0.09 per unit of volatility. If you would invest 14,885 in Waste Management on September 4, 2024 and sell it today you would earn a total of 7,641 from holding Waste Management or generate 51.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.37% |
| Values | Daily Returns |
Associated British Foods vs. Waste Management
Performance |
| Timeline |
| Associated British Foods |
| Waste Management |
Associated British and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Waste Management
The main advantage of trading using opposite Associated British and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Samsung Electronics Co | Associated British vs. Samsung Electronics Co | Associated British vs. Hyundai Motor | Associated British vs. Toyota Motor Corp |
| Waste Management vs. Beowulf Mining | Waste Management vs. Gaztransport et Technigaz | Waste Management vs. GoldMining | Waste Management vs. Coeur Mining |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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