Correlation Between LiCycle Holdings and Waste Management

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

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

Diversification Opportunities for LiCycle Holdings and Waste Management

0.2

Correlation Coefficient

LiCycle Holdings  Waste Management

Modest diversification

The 3 months correlation between LiCycle and Waste is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding LiCycle Holdings Corp and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and LiCycle Holdings 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 LiCycle Holdings Corp 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 LiCycle Holdings i.e., LiCycle Holdings and Waste Management go up and down completely randomly.

Pair Corralation between LiCycle Holdings and Waste Management

Given the investment horizon of 90 days LiCycle Holdings Corp is expected to generate 7.81 times more return on investment than Waste Management. However, LiCycle Holdings is 7.81 times more volatile than Waste Management. It trades about 0.02 of its potential returns per unit of risk. Waste Management is currently generating about -0.01 per unit of risk. If you would invest  219.00  in LiCycle Holdings Corp on September 29, 2024 and sell it today you would lose (21.00) from holding LiCycle Holdings Corp or give up 9.59% of portfolio value over 90 days.

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

LiCycle Holdings Corp  vs.  Waste Management

LiCycle Holdings Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LiCycle Holdings Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, LiCycle Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Waste Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LiCycle Holdings and Waste Management

The main advantage of trading using opposite LiCycle Holdings and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LiCycle Holdings 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 LiCycle Holdings Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..