Correlation Between Waste Management and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Waste Management and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and STMicroelectronics NV, you can compare the effects of market volatilities on Waste Management and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and STMicroelectronics.
Diversification Opportunities for Waste Management and STMicroelectronics
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Waste and STMicroelectronics is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Waste Management i.e., Waste Management and STMicroelectronics go up and down completely randomly.
Pair Corralation between Waste Management and STMicroelectronics
Assuming the 90 days trading horizon Waste Management is expected to generate 1.22 times more return on investment than STMicroelectronics. However, Waste Management is 1.22 times more volatile than STMicroelectronics NV. It trades about 0.24 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.4 per unit of risk. If you would invest 59,295 in Waste Management on August 26, 2024 and sell it today you would earn a total of 5,668 from holding Waste Management or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. STMicroelectronics NV
Performance |
| Timeline |
| Waste Management |
| STMicroelectronics |
Waste Management and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and STMicroelectronics
The main advantage of trading using opposite Waste Management and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Waste Management vs. Bemobi Mobile Tech | Waste Management vs. UnitedHealth Group Incorporated | Waste Management vs. United Rentals | Waste Management vs. Metalurgica Gerdau SA |
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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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