Correlation Between Republic Services and Casella Waste
Can any of the company-specific risk be diversified away by investing in both Republic Services and Casella Waste 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 Casella Waste into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Republic Services and Casella Waste Systems, you can compare the effects of market volatilities on Republic Services and Casella Waste 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 Casella Waste. Check out your portfolio center. Please also check ongoing floating volatility patterns of Republic Services and Casella Waste.
Diversification Opportunities for Republic Services and Casella Waste
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Republic and Casella is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Republic Services and Casella Waste Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casella Waste Systems 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 Casella Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casella Waste Systems has no effect on the direction of Republic Services i.e., Republic Services and Casella Waste go up and down completely randomly.
Pair Corralation between Republic Services and Casella Waste
Considering the 90-day investment horizon Republic Services is expected to generate 0.63 times more return on investment than Casella Waste. However, Republic Services is 1.59 times less risky than Casella Waste. It trades about -0.03 of its potential returns per unit of risk. Casella Waste Systems is currently generating about -0.07 per unit of risk. If you would invest 18,678 in Republic Services on February 4, 2024 and sell it today you would lose (127.00) from holding Republic Services or give up 0.68% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Republic Services vs. Casella Waste Systems
Performance |
Timeline |
Republic Services |
Casella Waste Systems |
Republic Services and Casella Waste Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Republic Services and Casella Waste
The main advantage of trading using opposite Republic Services and Casella Waste positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Republic Services position performs unexpectedly, Casella Waste 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 Casella Waste will offset losses from the drop in Casella Waste's long position.The idea behind Republic Services and Casella Waste Systems 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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