Correlation Between Waste Management and Bath Body
Can any of the company-specific risk be diversified away by investing in both Waste Management and Bath Body 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 Bath Body into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Bath Body Works, you can compare the effects of market volatilities on Waste Management and Bath Body 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 Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Bath Body.
Diversification Opportunities for Waste Management and Bath Body
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Waste and Bath is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works 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 Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Waste Management i.e., Waste Management and Bath Body go up and down completely randomly.
Pair Corralation between Waste Management and Bath Body
Assuming the 90 days trading horizon Waste Management is expected to generate 1.23 times more return on investment than Bath Body. However, Waste Management is 1.23 times more volatile than Bath Body Works. It trades about -0.02 of its potential returns per unit of risk. Bath Body Works is currently generating about -0.42 per unit of risk. If you would invest 63,492 in Waste Management on October 25, 2024 and sell it today you would lose (267.00) from holding Waste Management or give up 0.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Bath Body Works
Performance |
| Timeline |
| Waste Management |
| Bath Body Works |
Waste Management and Bath Body Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Bath Body
The main advantage of trading using opposite Waste Management and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.| Waste Management vs. Ares Management | Waste Management vs. Westinghouse Air Brake | Waste Management vs. Tres Tentos Agroindustrial | Waste Management vs. Martin Marietta Materials, |
| Bath Body vs. Nordon Indstrias Metalrgicas | Bath Body vs. Bemobi Mobile Tech | Bath Body vs. STMicroelectronics NV | Bath Body vs. Patria Investments Limited |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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