Correlation Between Waste Management and Wex
Can any of the company-specific risk be diversified away by investing in both Waste Management and Wex 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 Wex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Wex Inc, you can compare the effects of market volatilities on Waste Management and Wex 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 Wex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Wex.
Diversification Opportunities for Waste Management and Wex
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Waste and Wex is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Wex Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wex Inc 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 Wex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wex Inc has no effect on the direction of Waste Management i.e., Waste Management and Wex go up and down completely randomly.
Pair Corralation between Waste Management and Wex
Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.37 times more return on investment than Wex. However, Waste Management is 2.72 times less risky than Wex. It trades about 0.23 of its potential returns per unit of risk. Wex Inc is currently generating about -0.17 per unit of risk. If you would invest 21,171 in Waste Management on November 18, 2024 and sell it today you would earn a total of 1,602 from holding Waste Management or generate 7.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Wex Inc
Performance |
| Timeline |
| Waste Management |
| Wex Inc |
Waste Management and Wex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Wex
The main advantage of trading using opposite Waste Management and Wex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, Wex 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 Wex will offset losses from the drop in Wex'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 |
| Wex vs. CSG Systems International | Wex vs. VeriSign | Wex vs. Consensus Cloud Solutions | Wex vs. Global Blue 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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