Correlation Between Waste Management and Veralto

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

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

Diversification Opportunities for Waste Management and Veralto

-0.45

Correlation Coefficient

Waste Management  Veralto

Very good diversification

The 3 months correlation between Waste and Veralto is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Veralto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veralto 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 Veralto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veralto has no effect on the direction of Waste Management i.e., Waste Management and Veralto go up and down completely randomly.

Pair Corralation between Waste Management and Veralto

Allowing for the 90-day total investment horizon Waste Management is expected to generate 1.39 times less return on investment than Veralto. But when comparing it to its historical volatility, Waste Management is 1.47 times less risky than Veralto. It trades about 0.07 of its potential returns per unit of risk. Veralto is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,029  in Veralto on August 16, 2024 and sell it today you would earn a total of  2,455  from holding Veralto or generate 30.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	57.78%
Values	Daily Returns

Waste Management  vs.  Veralto

Waste Management

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 11 (%) 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 December 2024.

Veralto

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Waste Management and Veralto

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

The idea behind Waste Management and Veralto 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..