Correlation Between Gfl Environmental and United Fire

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

Diversification Opportunities for Gfl Environmental and United Fire

0.31

Correlation Coefficient

Gfl Environmental  United Fire

Weak diversification

The 3 months correlation between Gfl and United is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and United Fire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Fire 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 United Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Fire Group has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and United Fire go up and down completely randomly.

Pair Corralation between Gfl Environmental and United Fire

Considering the 90-day investment horizon Gfl Environmental Holdings is expected to generate 0.77 times more return on investment than United Fire. However, Gfl Environmental Holdings is 1.3 times less risky than United Fire. It trades about 0.05 of its potential returns per unit of risk. United Fire Group is currently generating about -0.04 per unit of risk. If you would invest  4,455  in Gfl Environmental Holdings on December 17, 2024 and sell it today you would earn a total of  173.00  from holding Gfl Environmental Holdings or generate 3.88% return on investment over 90 days.

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

Gfl Environmental Holdings  vs.  United Fire Group

Gfl Environmental

Risk-Adjusted Performance

Insignificant

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. Despite quite persistent technical and fundamental indicators, Gfl Environmental is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

United Fire Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Fire Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, United Fire is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gfl Environmental and United Fire

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

The idea behind Gfl Environmental Holdings and United Fire 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.