Correlation Between A1MT34 and Waste Management

Can any of the company-specific risk be diversified away by investing in both A1MT34 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 A1MT34 and Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between A1MT34 and Waste Management, you can compare the effects of market volatilities on A1MT34 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 A1MT34 with a short position of Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of A1MT34 and Waste Management.

Diversification Opportunities for A1MT34 and Waste Management

-0.42

Correlation Coefficient

A1MT34  Waste Management

Very good diversification

The 3 months correlation between A1MT34 and Waste is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding A1MT34 and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and A1MT34 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 A1MT34 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 A1MT34 i.e., A1MT34 and Waste Management go up and down completely randomly.

Pair Corralation between A1MT34 and Waste Management

Assuming the 90 days trading horizon A1MT34 is expected to under-perform the Waste Management. In addition to that, A1MT34 is 2.08 times more volatile than Waste Management. It trades about -0.02 of its total potential returns per unit of risk. Waste Management is currently generating about 0.15 per unit of volatility. If you would invest  55,917  in Waste Management on September 27, 2024 and sell it today you would earn a total of  7,575  from holding Waste Management or generate 13.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

A1MT34  vs.  Waste Management

A1MT34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A1MT34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, A1MT34 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Waste Management

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Waste Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with A1MT34 and Waste Management

The main advantage of trading using opposite A1MT34 and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A1MT34 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 A1MT34 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.