Correlation Between Gfl Environmental and Algoma Steel

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

Diversification Opportunities for Gfl Environmental and Algoma Steel

0.41

Correlation Coefficient

Gfl Environmental  Algoma Steel

Very weak diversification

The 3 months correlation between Gfl and Algoma is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Algoma Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Steel Group 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 Algoma Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Steel Group has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and Algoma Steel go up and down completely randomly.

Pair Corralation between Gfl Environmental and Algoma Steel

Considering the 90-day investment horizon Gfl Environmental Holdings is expected to generate 0.73 times more return on investment than Algoma Steel. However, Gfl Environmental Holdings is 1.37 times less risky than Algoma Steel. It trades about 0.05 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.03 per unit of risk. If you would invest  3,204  in Gfl Environmental Holdings on October 5, 2024 and sell it today you would earn a total of  1,260  from holding Gfl Environmental Holdings or generate 39.33% 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.  Algoma Steel Group

Gfl Environmental

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Gfl Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Algoma Steel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algoma Steel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Algoma Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Gfl Environmental and Algoma Steel

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

The idea behind Gfl Environmental Holdings and Algoma Steel Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.