Correlation Between Gfl Environmental and Fast Retailing

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

Diversification Opportunities for Gfl Environmental and Fast Retailing

-0.52

Correlation Coefficient

Gfl Environmental  Fast Retailing

Excellent diversification

The 3 months correlation between Gfl and Fast is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and Fast Retailing go up and down completely randomly.

Pair Corralation between Gfl Environmental and Fast Retailing

Considering the 90-day investment horizon Gfl Environmental Holdings is expected to generate 1.13 times more return on investment than Fast Retailing. However, Gfl Environmental is 1.13 times more volatile than Fast Retailing Co. It trades about 0.05 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.02 per unit of risk. If you would invest  4,360  in Gfl Environmental Holdings on October 7, 2024 and sell it today you would earn a total of  103.00  from holding Gfl Environmental Holdings or generate 2.36% return on investment over 90 days.

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

Gfl Environmental Holdings  vs.  Fast Retailing Co

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.

Fast Retailing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gfl Environmental and Fast Retailing

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

The idea behind Gfl Environmental Holdings and Fast Retailing Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.