Correlation Between Renewi Plc and Waste Management

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

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

Diversification Opportunities for Renewi Plc and Waste Management

-0.23

Correlation Coefficient

Renewi Plc  Waste Management

Very good diversification

The 3 months correlation between Renewi and Waste is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Renewi plc and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Renewi Plc 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 Renewi plc are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Renewi Plc i.e., Renewi Plc and Waste Management go up and down completely randomly.

Pair Corralation between Renewi Plc and Waste Management

Assuming the 90 days horizon Renewi plc is expected to under-perform the Waste Management. In addition to that, Renewi Plc is 6.25 times more volatile than Waste Management. It trades about -0.22 of its total potential returns per unit of risk. Waste Management is currently generating about -0.16 per unit of volatility. If you would invest  21,186  in Waste Management on January 20, 2024 and sell it today you would lose (479.00) from holding Waste Management or give up 2.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Renewi plc  vs.  Waste Management

Renewi plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renewi plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Waste Management

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Renewi Plc and Waste Management

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

The idea behind Renewi plc and Waste Management 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.