Correlation Between Waste Management and CARSALESCOM

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

Diversification Opportunities for Waste Management and CARSALESCOM

WasteCARSALESCOMDiversified AwayWasteCARSALESCOMDiversified Away100%
0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Waste and CARSALESCOM is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Waste Management i.e., Waste Management and CARSALESCOM go up and down completely randomly.

Pair Corralation between Waste Management and CARSALESCOM

Assuming the 90 days trading horizon Waste Management is expected to generate 0.58 times more return on investment than CARSALESCOM. However, Waste Management is 1.72 times less risky than CARSALESCOM. It trades about 0.36 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.15 per unit of risk. 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

Waste Management  vs.  CARSALESCOM

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15UWS WN6
       Timeline  
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
CARSALESCOM 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb21.52222.52323.52424.52525.5

Waste Management and CARSALESCOM Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.4-2.55-1.69-0.84-0.01420.841.722.63.484.36 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15UWS WN6
       Returns  

Pair Trading with Waste Management and CARSALESCOM

The main advantage of trading using opposite Waste Management and CARSALESCOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, CARSALESCOM 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 CARSALESCOM will offset losses from the drop in CARSALESCOM's long position.
The idea behind Waste Management and CARSALESCOM 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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