Correlation Between Republic Services and OriginClear

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

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

Diversification Opportunities for Republic Services and OriginClear

0.48

Correlation Coefficient

Republic Services  OriginClear

Very weak diversification

The 3 months correlation between Republic and OriginClear is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Republic Services and OriginClear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OriginClear and Republic Services 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 Republic Services are associated (or correlated) with OriginClear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OriginClear has no effect on the direction of Republic Services i.e., Republic Services and OriginClear go up and down completely randomly.

Pair Corralation between Republic Services and OriginClear

Considering the 90-day investment horizon Republic Services is expected to generate 17.56 times less return on investment than OriginClear. But when comparing it to its historical volatility, Republic Services is 14.97 times less risky than OriginClear. It trades about 0.06 of its potential returns per unit of risk. OriginClear is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.99  in OriginClear on January 24, 2024 and sell it today you would earn a total of  0.06  from holding OriginClear or generate 6.06% return on investment over 90 days.

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

Republic Services  vs.  OriginClear

Republic Services

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Services are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Republic Services reported solid returns over the last few months and may actually be approaching a breakup point.

OriginClear

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OriginClear are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent essential indicators, OriginClear displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Republic Services and OriginClear

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

The idea behind Republic Services and OriginClear 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.