Correlation Between Moderna and Waste Management

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

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

Diversification Opportunities for Moderna and Waste Management

-0.84

Correlation Coefficient

Moderna  Waste Management

Pay attention - limited upside

The 3 months correlation between Moderna and Waste is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Moderna and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Moderna 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 Moderna 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 Moderna i.e., Moderna and Waste Management go up and down completely randomly.

Pair Corralation between Moderna and Waste Management

Assuming the 90 days trading horizon Moderna is expected to under-perform the Waste Management. In addition to that, Moderna is 2.59 times more volatile than Waste Management. It trades about -0.13 of its total potential returns per unit of risk. Waste Management is currently generating about 0.09 per unit of volatility. If you would invest  59,462  in Waste Management on September 26, 2024 and sell it today you would earn a total of  3,353  from holding Waste Management or generate 5.64% return on investment over 90 days.

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

Moderna  vs.  Waste Management

Moderna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Waste Management

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 11 (%) 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 Moderna and Waste Management

The main advantage of trading using opposite Moderna and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderna 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 Moderna 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.