Correlation Between Waste Management and Cars
Can any of the company-specific risk be diversified away by investing in both Waste Management and Cars 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 Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Cars Inc, you can compare the effects of market volatilities on Waste Management and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Cars.
Diversification Opportunities for Waste Management and Cars
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waste and Cars is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Waste Management i.e., Waste Management and Cars go up and down completely randomly.
Pair Corralation between Waste Management and Cars
Assuming the 90 days trading horizon Waste Management is expected to generate 0.58 times more return on investment than Cars. However, Waste Management is 1.71 times less risky than Cars. It trades about 0.1 of its potential returns per unit of risk. Cars Inc is currently generating about 0.01 per unit of risk. If you would invest 18,254 in Waste Management on September 1, 2024 and sell it today you would earn a total of 3,331 from holding Waste Management or generate 18.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Cars Inc
Performance |
| Timeline |
| Waste Management |
| Cars Inc |
Waste Management and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Cars
The main advantage of trading using opposite Waste Management and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Waste Management vs. NTG Nordic Transport | Waste Management vs. PRECISION DRILLING P | Waste Management vs. DAIRY FARM INTL | Waste Management vs. Transportadora de Gas |
| Cars vs. Eastman Chemical | Cars vs. GRIFFIN MINING LTD | Cars vs. Shin Etsu Chemical Co | Cars vs. KINGBOARD CHEMICAL |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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