Correlation Between Gfl Environmental and Falcon Energy

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

Diversification Opportunities for Gfl Environmental and Falcon Energy

0.75

Correlation Coefficient

Gfl Environmental  Falcon Energy

Poor diversification

The 3 months correlation between Gfl and Falcon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials 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 Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and Falcon Energy go up and down completely randomly.

Pair Corralation between Gfl Environmental and Falcon Energy

Assuming the 90 days trading horizon Gfl Environmental Holdings is expected to generate 0.36 times more return on investment than Falcon Energy. However, Gfl Environmental Holdings is 2.81 times less risky than Falcon Energy. It trades about 0.19 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about 0.05 per unit of risk. 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

Gfl Environmental Holdings  vs.  Falcon Energy Materials

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.

Falcon Energy Materials

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Energy Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Falcon Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gfl Environmental and Falcon Energy

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

The idea behind Gfl Environmental Holdings and Falcon Energy Materials 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.