Correlation Between Gfl Environmental and CVS HEALTH

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

Diversification Opportunities for Gfl Environmental and CVS HEALTH

0.42

Correlation Coefficient

Gfl Environmental  CVS HEALTH

Very weak diversification

The 3 months correlation between Gfl and CVS is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR 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 CVS HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH CDR has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and CVS HEALTH go up and down completely randomly.

Pair Corralation between Gfl Environmental and CVS HEALTH

Assuming the 90 days trading horizon Gfl Environmental is expected to generate 12.6 times less return on investment than CVS HEALTH. But when comparing it to its historical volatility, Gfl Environmental Holdings is 1.66 times less risky than CVS HEALTH. It trades about 0.04 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,076  in CVS HEALTH CDR on December 19, 2024 and sell it today you would earn a total of  593.00  from holding CVS HEALTH CDR or generate 55.11% return on investment over 90 days.

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

Gfl Environmental Holdings  vs.  CVS HEALTH CDR

Gfl Environmental

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 3 (%) 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.

CVS HEALTH CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS HEALTH CDR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CVS HEALTH displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gfl Environmental and CVS HEALTH

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

The idea behind Gfl Environmental Holdings and CVS HEALTH CDR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.