Correlation Between Gfl Environmental and Sage Potash

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

Diversification Opportunities for Gfl Environmental and Sage Potash

0.17

Correlation Coefficient

Gfl Environmental  Sage Potash

Average diversification

The 3 months correlation between Gfl and Sage is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Sage Potash Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Potash Corp 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 Sage Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Potash Corp has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and Sage Potash go up and down completely randomly.

Pair Corralation between Gfl Environmental and Sage Potash

Assuming the 90 days trading horizon Gfl Environmental is expected to generate 19.74 times less return on investment than Sage Potash. But when comparing it to its historical volatility, Gfl Environmental Holdings is 4.22 times less risky than Sage Potash. It trades about 0.04 of its potential returns per unit of risk. Sage Potash Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Sage Potash Corp on December 19, 2024 and sell it today you would earn a total of  17.00  from holding Sage Potash Corp or generate 80.95% return on investment over 90 days.

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

Gfl Environmental Holdings  vs.  Sage Potash Corp

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.

Sage Potash Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Potash Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Sage Potash showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gfl Environmental and Sage Potash

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

The idea behind Gfl Environmental Holdings and Sage Potash Corp 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.