Correlation Between Waste Management and Bumrungrad Hospital

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

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

Diversification Opportunities for Waste Management and Bumrungrad Hospital

-0.77

Correlation Coefficient

Waste Management  Bumrungrad Hospital

Pay attention - limited upside

The 3 months correlation between Waste and Bumrungrad is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Bumrungrad Hospital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumrungrad Hospital and Waste Management 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 Waste Management are associated (or correlated) with Bumrungrad Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumrungrad Hospital has no effect on the direction of Waste Management i.e., Waste Management and Bumrungrad Hospital go up and down completely randomly.

Pair Corralation between Waste Management and Bumrungrad Hospital

Assuming the 90 days trading horizon Waste Management is expected to generate 0.49 times more return on investment than Bumrungrad Hospital. However, Waste Management is 2.04 times less risky than Bumrungrad Hospital. It trades about 0.18 of its potential returns per unit of risk. Bumrungrad Hospital Public is currently generating about -0.06 per unit of risk. If you would invest  18,780  in Waste Management on September 3, 2024 and sell it today you would earn a total of  2,805  from holding Waste Management or generate 14.94% return on investment over 90 days.

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

Waste Management  vs.  Bumrungrad Hospital Public

Waste Management

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Waste Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bumrungrad Hospital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bumrungrad Hospital Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Waste Management and Bumrungrad Hospital

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

The idea behind Waste Management and Bumrungrad Hospital Public 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.