Correlation Between Waste Management and Oshkosh

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

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

Diversification Opportunities for Waste Management and Oshkosh

0.59

Correlation Coefficient

Waste Management  Oshkosh

Very weak diversification

The 3 months correlation between Waste and Oshkosh is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Oshkosh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oshkosh 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 Oshkosh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oshkosh has no effect on the direction of Waste Management i.e., Waste Management and Oshkosh go up and down completely randomly.

Pair Corralation between Waste Management and Oshkosh

Allowing for the 90-day total investment horizon Waste Management is expected to under-perform the Oshkosh. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 2.08 times less risky than Oshkosh. The stock trades about -0.07 of its potential returns per unit of risk. The Oshkosh is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,022  in Oshkosh on January 25, 2024 and sell it today you would earn a total of  25.00  from holding Oshkosh or generate 0.21% 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.  Oshkosh

Waste Management

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Waste Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Oshkosh

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oshkosh are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Oshkosh may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Waste Management and Oshkosh

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

The idea behind Waste Management and Oshkosh 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 Transaction History module to view history of all your transactions and understand their impact on performance.