Correlation Between Waste Management and CM Hospitalar

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

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

Diversification Opportunities for Waste Management and CM Hospitalar

0.06

Correlation Coefficient

Waste Management  CM Hospitalar

Significant diversification

The 3 months correlation between Waste and VVEO3 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and CM Hospitalar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM Hospitalar SA 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 CM Hospitalar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM Hospitalar SA has no effect on the direction of Waste Management i.e., Waste Management and CM Hospitalar go up and down completely randomly.

Pair Corralation between Waste Management and CM Hospitalar

Assuming the 90 days trading horizon Waste Management is expected to generate 0.45 times more return on investment than CM Hospitalar. However, Waste Management is 2.24 times less risky than CM Hospitalar. It trades about 0.03 of its potential returns per unit of risk. CM Hospitalar SA is currently generating about -0.02 per unit of risk. If you would invest  64,344  in Waste Management on September 15, 2024 and sell it today you would earn a total of  360.00  from holding Waste Management or generate 0.56% return on investment over 90 days.

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

Waste Management  vs.  CM Hospitalar SA

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. Despite somewhat uncertain primary indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CM Hospitalar SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CM Hospitalar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic 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 CM Hospitalar

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

The idea behind Waste Management and CM Hospitalar SA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.