Correlation Between Waste Management and International Paper
Can any of the company-specific risk be diversified away by investing in both Waste Management and International Paper 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 International Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and International Paper, you can compare the effects of market volatilities on Waste Management and International Paper 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 International Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and International Paper.
Diversification Opportunities for Waste Management and International Paper
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Waste and International is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper 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 International Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Paper has no effect on the direction of Waste Management i.e., Waste Management and International Paper go up and down completely randomly.
Pair Corralation between Waste Management and International Paper
Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.36 times more return on investment than International Paper. However, Waste Management is 2.8 times less risky than International Paper. It trades about -0.1 of its potential returns per unit of risk. International Paper is currently generating about -0.44 per unit of risk. If you would invest 21,177 in Waste Management on January 25, 2024 and sell it today you would lose (299.00) from holding Waste Management or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. International Paper
Performance |
| Timeline |
| Waste Management |
| International Paper |
Waste Management and International Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and International Paper
The main advantage of trading using opposite Waste Management and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, International Paper 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 International Paper will offset losses from the drop in International Paper's long position.| Waste Management vs. Maximus | Waste Management vs. CBIZ Inc | Waste Management vs. First Advantage Corp | Waste Management vs. Cass Information Systems |
| International Paper vs. Reynolds Consumer Products | International Paper vs. Ball Corporation | International Paper vs. Crown Holdings | International Paper vs. Myers Industries |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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