Correlation Between Gfl Environmental and ABM Industries

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

Diversification Opportunities for Gfl Environmental and ABM Industries

0.79

Correlation Coefficient

Gfl Environmental  ABM Industries

Poor diversification

The 3 months correlation between Gfl and ABM is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and ABM Industries Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABM Industries 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 ABM Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABM Industries has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and ABM Industries go up and down completely randomly.

Pair Corralation between Gfl Environmental and ABM Industries

Considering the 90-day investment horizon Gfl Environmental Holdings is expected to generate 0.83 times more return on investment than ABM Industries. However, Gfl Environmental Holdings is 1.2 times less risky than ABM Industries. It trades about 0.07 of its potential returns per unit of risk. ABM Industries Incorporated is currently generating about 0.01 per unit of risk. If you would invest  4,330  in Gfl Environmental Holdings on August 30, 2024 and sell it today you would earn a total of  296.00  from holding Gfl Environmental Holdings or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Gfl Environmental Holdings  vs.  ABM Industries Incorporated

Gfl Environmental

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Gfl Environmental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ABM Industries

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Gfl Environmental and ABM Industries

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

The idea behind Gfl Environmental Holdings and ABM Industries Incorporated 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.