Correlation Between GFL ENVIRONM and EQT AB

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

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

Diversification Opportunities for GFL ENVIRONM and EQT AB

-0.45

Correlation Coefficient

GFL ENVIRONM  EQT AB

Very good diversification

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

Pair Corralation between GFL ENVIRONM and EQT AB

Assuming the 90 days horizon GFL ENVIRONM is expected to generate 5.92 times less return on investment than EQT AB. But when comparing it to its historical volatility, GFL ENVIRONM is 1.37 times less risky than EQT AB. It trades about 0.06 of its potential returns per unit of risk. EQT AB is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,523  in EQT AB on September 12, 2024 and sell it today you would earn a total of  332.00  from holding EQT AB or generate 13.16% return on investment over 90 days.

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

GFL ENVIRONM  vs.  EQT AB

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.

EQT AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EQT AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EQT AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GFL ENVIRONM and EQT AB

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

The idea behind GFL ENVIRONM and EQT AB 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.