Correlation Between 784730AB9 and COVANTA

Can any of the company-specific risk be diversified away by investing in both 784730AB9 and COVANTA 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 784730AB9 and COVANTA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US784730AB94 and COVANTA HLDG P, you can compare the effects of market volatilities on 784730AB9 and COVANTA 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 784730AB9 with a short position of COVANTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of 784730AB9 and COVANTA.

Diversification Opportunities for 784730AB9 and COVANTA

-0.37

Correlation Coefficient

784730AB9  COVANTA

Very good diversification

The 3 months correlation between 784730AB9 and COVANTA is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding US784730AB94 and COVANTA HLDG P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVANTA HLDG P and 784730AB9 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 US784730AB94 are associated (or correlated) with COVANTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVANTA HLDG P has no effect on the direction of 784730AB9 i.e., 784730AB9 and COVANTA go up and down completely randomly.

Pair Corralation between 784730AB9 and COVANTA

Assuming the 90 days trading horizon US784730AB94 is expected to under-perform the COVANTA. But the bond apears to be less risky and, when comparing its historical volatility, US784730AB94 is 16.47 times less risky than COVANTA. The bond trades about -0.01 of its potential returns per unit of risk. The COVANTA HLDG P is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,472  in COVANTA HLDG P on September 30, 2024 and sell it today you would lose (437.00) from holding COVANTA HLDG P or give up 5.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.65%
Values	Daily Returns

US784730AB94  vs.  COVANTA HLDG P

US784730AB94

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in US784730AB94 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 784730AB9 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

COVANTA HLDG P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COVANTA HLDG P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond'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 COVANTA HLDG P investors.

Pair Trading with 784730AB9 and COVANTA

The main advantage of trading using opposite 784730AB9 and COVANTA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 784730AB9 position performs unexpectedly, COVANTA 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 COVANTA will offset losses from the drop in COVANTA's long position.

The idea behind US784730AB94 and COVANTA HLDG P 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.