Correlation Between Waste Management and ESGL Holdings
Can any of the company-specific risk be diversified away by investing in both Waste Management and ESGL Holdings 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 ESGL Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and ESGL Holdings Limited, you can compare the effects of market volatilities on Waste Management and ESGL Holdings 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 ESGL Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and ESGL Holdings.
Diversification Opportunities for Waste Management and ESGL Holdings
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waste and ESGL is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited 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 ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of Waste Management i.e., Waste Management and ESGL Holdings go up and down completely randomly.
Pair Corralation between Waste Management and ESGL Holdings
Allowing for the 90-day total investment horizon Waste Management is expected to generate 10.64 times less return on investment than ESGL Holdings. But when comparing it to its historical volatility, Waste Management is 13.93 times less risky than ESGL Holdings. It trades about 0.19 of its potential returns per unit of risk. ESGL Holdings Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1.10 in ESGL Holdings Limited on August 30, 2024 and sell it today you would earn a total of 0.59 from holding ESGL Holdings Limited or generate 53.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 88.64% |
| Values | Daily Returns |
Waste Management vs. ESGL Holdings Limited
Performance |
| Timeline |
| Waste Management |
| ESGL Holdings Limited |
Waste Management and ESGL Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and ESGL Holdings
The main advantage of trading using opposite Waste Management and ESGL Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, ESGL Holdings 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 ESGL Holdings will offset losses from the drop in ESGL Holdings' long position.| Waste Management vs. CRA International | Waste Management vs. ICF International | Waste Management vs. Forrester Research | Waste Management vs. Huron Consulting Group |
| ESGL Holdings vs. CRA International | ESGL Holdings vs. ICF International | ESGL Holdings vs. Forrester Research | ESGL Holdings vs. Huron Consulting Group |
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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