Correlation Between Waste Management and FEMALE HEALTH

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

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

Diversification Opportunities for Waste Management and FEMALE HEALTH

-0.47

Correlation Coefficient

Waste Management  FEMALE HEALTH

Very good diversification

The 3 months correlation between Waste and FEMALE is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and FEMALE HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEMALE HEALTH 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 FEMALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEMALE HEALTH has no effect on the direction of Waste Management i.e., Waste Management and FEMALE HEALTH go up and down completely randomly.

Pair Corralation between Waste Management and FEMALE HEALTH

Assuming the 90 days trading horizon Waste Management is expected to generate 0.32 times more return on investment than FEMALE HEALTH. However, Waste Management is 3.1 times less risky than FEMALE HEALTH. It trades about 0.13 of its potential returns per unit of risk. FEMALE HEALTH is currently generating about -0.05 per unit of risk. If you would invest  18,585  in Waste Management on September 12, 2024 and sell it today you would earn a total of  1,940  from holding Waste Management or generate 10.44% return on investment over 90 days.

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

Waste Management  vs.  FEMALE HEALTH

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. In spite of comparatively uncertain basic indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FEMALE HEALTH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEMALE HEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Waste Management and FEMALE HEALTH

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

The idea behind Waste Management and FEMALE HEALTH 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.