Correlation Between Waste Management and WEC Energy
Can any of the company-specific risk be diversified away by investing in both Waste Management and WEC Energy 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 WEC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and WEC Energy Group, you can compare the effects of market volatilities on Waste Management and WEC Energy 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 WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and WEC Energy.
Diversification Opportunities for Waste Management and WEC Energy
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waste and WEC is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group 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 WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Waste Management i.e., Waste Management and WEC Energy go up and down completely randomly.
Pair Corralation between Waste Management and WEC Energy
Allowing for the 90-day total investment horizon Waste Management is expected to generate 1.27 times more return on investment than WEC Energy. However, Waste Management is 1.27 times more volatile than WEC Energy Group. It trades about 0.13 of its potential returns per unit of risk. WEC Energy Group is currently generating about 0.15 per unit of risk. If you would invest 20,864 in Waste Management on September 2, 2024 and sell it today you would earn a total of 1,958 from holding Waste Management or generate 9.38% 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. WEC Energy Group
Performance |
| Timeline |
| Waste Management |
| WEC Energy Group |
Waste Management and WEC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and WEC Energy
The main advantage of trading using opposite Waste Management and WEC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, WEC Energy 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 WEC Energy will offset losses from the drop in WEC Energy's long position.| Waste Management vs. Waste Connections | Waste Management vs. Clean Harbors | Waste Management vs. Casella Waste Systems | Waste Management vs. Gfl Environmental Holdings |
| WEC Energy vs. Alliant Energy Corp | WEC Energy vs. CMS Energy | WEC Energy vs. Exelon | WEC Energy vs. Evergy, |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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