Correlation Between CVS HEALTH and Gfl Environmental

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

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

Diversification Opportunities for CVS HEALTH and Gfl Environmental

-0.37

Correlation Coefficient

CVS HEALTH  Gfl Environmental

Very good diversification

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

Pair Corralation between CVS HEALTH and Gfl Environmental

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Gfl Environmental. In addition to that, CVS HEALTH is 1.99 times more volatile than Gfl Environmental Holdings. It trades about -0.02 of its total potential returns per unit of risk. Gfl Environmental Holdings is currently generating about 0.06 per unit of volatility. If you would invest  5,771  in Gfl Environmental Holdings on October 23, 2024 and sell it today you would earn a total of  293.00  from holding Gfl Environmental Holdings or generate 5.08% return on investment over 90 days.

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

CVS HEALTH CDR  vs.  Gfl Environmental Holdings

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CVS HEALTH is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Gfl Environmental

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Gfl Environmental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CVS HEALTH and Gfl Environmental

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

The idea behind CVS HEALTH CDR and Gfl Environmental Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.