Correlation Between De Grey and Waste Management

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Can any of the company-specific risk be diversified away by investing in both De Grey 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 De Grey and Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between De Grey Mining and Waste Management, you can compare the effects of market volatilities on De Grey 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 De Grey with a short position of Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Grey and Waste Management.

Diversification Opportunities for De Grey and Waste Management

DGDWasteDiversified AwayDGDWasteDiversified Away100%
0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between DGD and Waste is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and Waste Management go up and down completely randomly.

Pair Corralation between De Grey and Waste Management

Assuming the 90 days trading horizon De Grey is expected to generate 1.52 times less return on investment than Waste Management. In addition to that, De Grey is 2.28 times more volatile than Waste Management. It trades about 0.1 of its total potential returns per unit of risk. Waste Management is currently generating about 0.36 per unit of volatility. If you would invest  20,200  in Waste Management on November 30, 2024 and sell it today you would earn a total of  1,835  from holding Waste Management or generate 9.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

De Grey Mining  vs.  Waste Management

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 010203040
JavaScript chart by amCharts 3.21.15DGD UWS
       Timeline  
De Grey Mining 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, De Grey is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.90.9511.051.11.151.21.25
Waste Management 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb195200205210215220

De Grey and Waste Management Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-13.02-9.75-6.48-3.210.03.36.7610.2313.717.17 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15DGD UWS
       Returns  

Pair Trading with De Grey and Waste Management

The main advantage of trading using opposite De Grey and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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.
The idea behind De Grey Mining and Waste Management 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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