Correlation Between United States and GFL ENVIRONM

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

By analyzing existing cross correlation between United States Steel and GFL ENVIRONM, you can compare the effects of market volatilities on United States and GFL ENVIRONM 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 United States with a short position of GFL ENVIRONM. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and GFL ENVIRONM.

Diversification Opportunities for United States and GFL ENVIRONM

0.78

Correlation Coefficient

United States  GFL ENVIRONM

Poor diversification

The 3 months correlation between United and GFL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and GFL ENVIRONM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFL ENVIRONM and United States 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 United States Steel are associated (or correlated) with GFL ENVIRONM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFL ENVIRONM has no effect on the direction of United States i.e., United States and GFL ENVIRONM go up and down completely randomly.

Pair Corralation between United States and GFL ENVIRONM

Assuming the 90 days trading horizon United States Steel is expected to under-perform the GFL ENVIRONM. In addition to that, United States is 1.47 times more volatile than GFL ENVIRONM. It trades about -0.08 of its total potential returns per unit of risk. GFL ENVIRONM is currently generating about 0.06 per unit of volatility. If you would invest  4,260  in GFL ENVIRONM on September 12, 2024 and sell it today you would earn a total of  80.00  from holding GFL ENVIRONM or generate 1.88% return on investment over 90 days.

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

United States Steel  vs.  GFL ENVIRONM

United States Steel

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

GFL ENVIRONM

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GFL ENVIRONM are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GFL ENVIRONM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and GFL ENVIRONM

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

The idea behind United States Steel and GFL ENVIRONM 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.