Correlation Between First National and Gfl Environmental

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

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

Diversification Opportunities for First National and Gfl Environmental

0.67

Correlation Coefficient

First National  Gfl Environmental

Poor diversification

The 3 months correlation between First and Gfl is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Gfl Environmental Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gfl Environmental and First National 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 First National Financial 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 First National i.e., First National and Gfl Environmental go up and down completely randomly.

Pair Corralation between First National and Gfl Environmental

Assuming the 90 days trading horizon First National is expected to generate 2.06 times less return on investment than Gfl Environmental. But when comparing it to its historical volatility, First National Financial is 1.21 times less risky than Gfl Environmental. It trades about 0.11 of its potential returns per unit of risk. Gfl Environmental Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,438  in Gfl Environmental Holdings on September 13, 2024 and sell it today you would earn a total of  1,004  from holding Gfl Environmental Holdings or generate 18.46% return on investment over 90 days.

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

First National Financial  vs.  Gfl Environmental Holdings

First National Financial

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gfl Environmental

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, Gfl Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First National and Gfl Environmental

The main advantage of trading using opposite First National and Gfl Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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 First National Financial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.