Correlation Between Lupatech and Waste Management

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

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

Diversification Opportunities for Lupatech and Waste Management

-0.36

Correlation Coefficient

Lupatech  Waste Management

Very good diversification

The 3 months correlation between Lupatech and Waste is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lupatech SA and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Lupatech 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 Lupatech SA 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 Lupatech i.e., Lupatech and Waste Management go up and down completely randomly.

Pair Corralation between Lupatech and Waste Management

Assuming the 90 days trading horizon Lupatech SA is expected to under-perform the Waste Management. In addition to that, Lupatech is 1.81 times more volatile than Waste Management. It trades about -0.07 of its total potential returns per unit of risk. Waste Management is currently generating about 0.14 per unit of volatility. If you would invest  60,062  in Waste Management on September 2, 2024 and sell it today you would earn a total of  7,972  from holding Waste Management or generate 13.27% return on investment over 90 days.

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

Lupatech SA  vs.  Waste Management

Lupatech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Waste Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Waste Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lupatech and Waste Management

The main advantage of trading using opposite Lupatech and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lupatech 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 Lupatech SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.