Correlation Between Waste Management and Carsales
Can any of the company-specific risk be diversified away by investing in both Waste Management and Carsales 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 Carsales 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 Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Carsales.
Diversification Opportunities for Waste Management and Carsales
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Waste and Carsales is 0.86. 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 Carsales. 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 Carsales go up and down completely randomly.
Pair Corralation between Waste Management and Carsales
Assuming the 90 days trading horizon Waste Management is expected to generate 1.22 times more return on investment than Carsales. However, Waste Management is 1.22 times more volatile than CarsalesCom. It trades about 0.35 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.35 per unit of risk. If you would invest 19,232 in Waste Management on August 29, 2024 and sell it today you would earn a total of 2,493 from holding Waste Management or generate 12.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. CarsalesCom
Performance |
| Timeline |
| Waste Management |
| CarsalesCom |
Waste Management and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Carsales
The main advantage of trading using opposite Waste Management and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Waste Management vs. Singapore Reinsurance | Waste Management vs. SEKISUI CHEMICAL | Waste Management vs. Universal Insurance Holdings | Waste Management vs. MYFAIR GOLD P |
| Carsales vs. CapitaLand Investment Limited | Carsales vs. Genco Shipping Trading | Carsales vs. MGIC INVESTMENT | Carsales vs. WisdomTree Investments |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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