Correlation Between Waste Management and PENN NATL

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

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

Diversification Opportunities for Waste Management and PENN NATL

-0.85

Correlation Coefficient

Waste Management  PENN NATL

Pay attention - limited upside

The 3 months correlation between Waste and PENN is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of Waste Management i.e., Waste Management and PENN NATL go up and down completely randomly.

Pair Corralation between Waste Management and PENN NATL

Assuming the 90 days trading horizon Waste Management is expected to under-perform the PENN NATL. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 2.26 times less risky than PENN NATL. The stock trades about -0.04 of its potential returns per unit of risk. The PENN NATL GAMING is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,386  in PENN NATL GAMING on May 6, 2025 and sell it today you would earn a total of  178.00  from holding PENN NATL GAMING or generate 12.84% return on investment over 90 days.

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

Waste Management  vs.  PENN NATL GAMING

Waste Management

Risk-Adjusted Performance

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 comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PENN NATL GAMING

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waste Management and PENN NATL

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

The idea behind Waste Management and PENN NATL GAMING 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 Global Correlations module to find global opportunities by holding instruments from different markets.