Correlation Between Waste Management and Media

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

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

Diversification Opportunities for Waste Management and Media

0.55

Correlation Coefficient

Waste Management  Media

Very weak diversification

The 3 months correlation between Waste and Media is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Media and Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media and Games 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 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media and Games has no effect on the direction of Waste Management i.e., Waste Management and Media go up and down completely randomly.

Pair Corralation between Waste Management and Media

Assuming the 90 days trading horizon Waste Management is expected to generate 0.35 times more return on investment than Media. However, Waste Management is 2.83 times less risky than Media. It trades about 0.07 of its potential returns per unit of risk. Media and Games is currently generating about -0.07 per unit of risk. If you would invest  19,164  in Waste Management on September 27, 2024 and sell it today you would earn a total of  672.00  from holding Waste Management or generate 3.51% return on investment over 90 days.

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

Waste Management  vs.  Media and Games

Waste Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Media and Games

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Waste Management and Media

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

The idea behind Waste Management and Media and Games 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.