Correlation Between Waste Management and ABM Industries
Can any of the company-specific risk be diversified away by investing in both Waste Management and ABM Industries 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 ABM Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and ABM Industries Incorporated, you can compare the effects of market volatilities on Waste Management and ABM Industries 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 ABM Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and ABM Industries.
Diversification Opportunities for Waste Management and ABM Industries
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waste and ABM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and ABM Industries Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABM Industries 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 ABM Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABM Industries has no effect on the direction of Waste Management i.e., Waste Management and ABM Industries go up and down completely randomly.
Pair Corralation between Waste Management and ABM Industries
Allowing for the 90-day total investment horizon Waste Management is expected to generate 1.35 times less return on investment than ABM Industries. But when comparing it to its historical volatility, Waste Management is 1.04 times less risky than ABM Industries. It trades about 0.14 of its potential returns per unit of risk. ABM Industries Incorporated is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 5,335 in ABM Industries Incorporated on August 24, 2024 and sell it today you would earn a total of 336.00 from holding ABM Industries Incorporated or generate 6.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. ABM Industries Incorporated
Performance |
| Timeline |
| Waste Management |
| ABM Industries |
Waste Management and ABM Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and ABM Industries
The main advantage of trading using opposite Waste Management and ABM Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, ABM Industries 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 ABM Industries will offset losses from the drop in ABM Industries' long position.| Waste Management vs. Waste Connections | Waste Management vs. Clean Harbors | Waste Management vs. Casella Waste Systems | Waste Management vs. Gfl Environmental Holdings |
| ABM Industries vs. Cass Information Systems | ABM Industries vs. First Advantage Corp | ABM Industries vs. Rentokil Initial PLC | ABM Industries vs. CBIZ Inc |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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