Correlation Between Four Seasons and Waste Management

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

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

Diversification Opportunities for Four Seasons and Waste Management

-0.16

Correlation Coefficient

Four Seasons  Waste Management

Good diversification

The 3 months correlation between Four and Waste is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Four Seasons 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 Four Seasons Education 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 Four Seasons i.e., Four Seasons and Waste Management go up and down completely randomly.

Pair Corralation between Four Seasons and Waste Management

Given the investment horizon of 90 days Four Seasons Education is expected to generate 3.28 times more return on investment than Waste Management. However, Four Seasons is 3.28 times more volatile than Waste Management. It trades about 0.12 of its potential returns per unit of risk. Waste Management is currently generating about 0.04 per unit of risk. If you would invest  882.00  in Four Seasons Education on September 20, 2024 and sell it today you would earn a total of  247.00  from holding Four Seasons Education or generate 28.0% return on investment over 90 days.

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

Four Seasons Education  vs.  Waste Management

Four Seasons Education

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Four Seasons Education are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Four Seasons unveiled solid returns over the last few months and may actually be approaching a breakup point.

Waste Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Waste Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Four Seasons and Waste Management

The main advantage of trading using opposite Four Seasons and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Four Seasons 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 Four Seasons Education 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.