Correlation Between Fifth Third and Casella Waste

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

By analyzing existing cross correlation between Fifth Third Bancorp and Casella Waste Systems, you can compare the effects of market volatilities on Fifth Third 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 Fifth Third with a short position of Casella Waste. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Casella Waste.

Diversification Opportunities for Fifth Third and Casella Waste

-0.22

Correlation Coefficient

Fifth Third  Casella Waste

Very good diversification

The 3 months correlation between Fifth and Casella is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp 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 Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and Casella Waste go up and down completely randomly.

Pair Corralation between Fifth Third and Casella Waste

Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 0.8 times more return on investment than Casella Waste. However, Fifth Third Bancorp is 1.25 times less risky than Casella Waste. It trades about 0.09 of its potential returns per unit of risk. Casella Waste Systems is currently generating about -0.04 per unit of risk. If you would invest  4,124  in Fifth Third Bancorp on August 8, 2024 and sell it today you would earn a total of  192.00  from holding Fifth Third Bancorp or generate 4.66% return on investment over 90 days.

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

Fifth Third Bancorp  vs.  Casella Waste Systems

Fifth Third Bancorp

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fifth Third may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Casella Waste Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Casella Waste Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fifth Third and Casella Waste

The main advantage of trading using opposite Fifth Third and Casella Waste positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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 Fifth Third Bancorp 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.