Correlation Between Gfl Environmental and Waste Management

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

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

Diversification Opportunities for Gfl Environmental and Waste Management

0.17

Correlation Coefficient

Gfl Environmental  Waste Management

Average diversification

The 3 months correlation between Gfl and Waste is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Gfl Environmental 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 Gfl Environmental Holdings 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 Gfl Environmental i.e., Gfl Environmental and Waste Management go up and down completely randomly.

Pair Corralation between Gfl Environmental and Waste Management

Considering the 90-day investment horizon Gfl Environmental Holdings is expected to under-perform the Waste Management. In addition to that, Gfl Environmental is 2.65 times more volatile than Waste Management. It trades about -0.12 of its total potential returns per unit of risk. Waste Management is currently generating about -0.15 per unit of volatility. If you would invest  21,177  in Waste Management on January 24, 2024 and sell it today you would lose (424.00) from holding Waste Management or give up 2.0% of portfolio value over 90 days.

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

Gfl Environmental Holdings  vs.  Waste Management

Gfl Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gfl Environmental Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Gfl Environmental is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Waste Management

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Waste Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gfl Environmental and Waste Management

The main advantage of trading using opposite Gfl Environmental and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gfl Environmental 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 Gfl Environmental Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.