Correlation Between Waste Management and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Waste Management and SMA Solar 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 SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and SMA Solar Technology, you can compare the effects of market volatilities on Waste Management and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and SMA Solar.
Diversification Opportunities for Waste Management and SMA Solar
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Waste and SMA is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Waste Management i.e., Waste Management and SMA Solar go up and down completely randomly.
Pair Corralation between Waste Management and SMA Solar
Assuming the 90 days trading horizon Waste Management is expected to generate 0.31 times more return on investment than SMA Solar. However, Waste Management is 3.25 times less risky than SMA Solar. It trades about 0.08 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.11 per unit of risk. If you would invest 14,943 in Waste Management on September 12, 2024 and sell it today you would earn a total of 5,582 from holding Waste Management or generate 37.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. SMA Solar Technology
Performance |
| Timeline |
| Waste Management |
| SMA Solar Technology |
Waste Management and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and SMA Solar
The main advantage of trading using opposite Waste Management and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| Waste Management vs. Apple Inc | Waste Management vs. Apple Inc | Waste Management vs. Apple Inc | Waste Management vs. Apple Inc |
| SMA Solar vs. Sunrun Inc | SMA Solar vs. Superior Plus Corp | SMA Solar vs. SIVERS SEMICONDUCTORS AB | SMA Solar vs. Norsk Hydro ASA |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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