Correlation Between PLAYMATES TOYS and Waste Management

Can any of the company-specific risk be diversified away by investing in both PLAYMATES TOYS and Waste Management 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 PLAYMATES TOYS and Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PLAYMATES TOYS and Waste Management, you can compare the effects of market volatilities on PLAYMATES TOYS and Waste Management 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 PLAYMATES TOYS with a short position of Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYMATES TOYS and Waste Management.

Diversification Opportunities for PLAYMATES TOYS and Waste Management

-0.08

Correlation Coefficient

PLAYMATES TOYS  Waste Management

Good diversification

The 3 months correlation between PLAYMATES and Waste is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and PLAYMATES TOYS 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 PLAYMATES TOYS are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of PLAYMATES TOYS i.e., PLAYMATES TOYS and Waste Management go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and Waste Management

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 3.38 times more return on investment than Waste Management. However, PLAYMATES TOYS is 3.38 times more volatile than Waste Management. It trades about 0.1 of its potential returns per unit of risk. Waste Management is currently generating about -0.6 per unit of risk. If you would invest  6.60  in PLAYMATES TOYS on September 27, 2024 and sell it today you would earn a total of  0.30  from holding PLAYMATES TOYS or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PLAYMATES TOYS  vs.  Waste Management

PLAYMATES TOYS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYMATES TOYS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PLAYMATES TOYS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Waste Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PLAYMATES TOYS and Waste Management

The main advantage of trading using opposite PLAYMATES TOYS and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAYMATES TOYS position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.

The idea behind PLAYMATES TOYS and Waste Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.