Correlation Between Gfl Environmental and Bausch Health

Can any of the company-specific risk be diversified away by investing in both Gfl Environmental and Bausch Health 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 Bausch Health 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 Bausch Health Companies, you can compare the effects of market volatilities on Gfl Environmental and Bausch Health 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 Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gfl Environmental and Bausch Health.

Diversification Opportunities for Gfl Environmental and Bausch Health

0.37

Correlation Coefficient

Gfl Environmental  Bausch Health

Weak diversification

The 3 months correlation between Gfl and Bausch is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies 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 Bausch Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and Bausch Health go up and down completely randomly.

Pair Corralation between Gfl Environmental and Bausch Health

Assuming the 90 days trading horizon Gfl Environmental Holdings is expected to generate 0.42 times more return on investment than Bausch Health. However, Gfl Environmental Holdings is 2.39 times less risky than Bausch Health. It trades about 0.21 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.08 per unit of risk. If you would invest  5,331  in Gfl Environmental Holdings on September 17, 2024 and sell it today you would earn a total of  1,054  from holding Gfl Environmental Holdings or generate 19.77% return on investment over 90 days.

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

Gfl Environmental Holdings  vs.  Bausch Health Companies

Gfl Environmental

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Gfl Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Bausch Health Companies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Bausch Health displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gfl Environmental and Bausch Health

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

The idea behind Gfl Environmental Holdings and Bausch Health Companies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.