Correlation Between Waste Management and Mink Therapeutics

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

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

Diversification Opportunities for Waste Management and Mink Therapeutics

0.2

Correlation Coefficient

Waste Management  Mink Therapeutics

Modest diversification

The 3 months correlation between Waste and Mink is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Mink Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mink Therapeutics 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 Mink Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mink Therapeutics has no effect on the direction of Waste Management i.e., Waste Management and Mink Therapeutics go up and down completely randomly.

Pair Corralation between Waste Management and Mink Therapeutics

Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.14 times more return on investment than Mink Therapeutics. However, Waste Management is 7.21 times less risky than Mink Therapeutics. It trades about 0.25 of its potential returns per unit of risk. Mink Therapeutics is currently generating about 0.02 per unit of risk. If you would invest  16,278  in Waste Management on January 30, 2024 and sell it today you would earn a total of  4,732  from holding Waste Management or generate 29.07% return on investment over 90 days.

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

Waste Management  vs.  Mink Therapeutics

Waste Management

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 15 (%) 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.

Mink Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mink Therapeutics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Mink Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waste Management and Mink Therapeutics

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

The idea behind Waste Management and Mink Therapeutics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.