Correlation Between Gfl Environmental and Universal Insurance

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

Diversification Opportunities for Gfl Environmental and Universal Insurance

0.78

Correlation Coefficient

Gfl Environmental  Universal Insurance

Poor diversification

The 3 months correlation between Gfl and Universal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance 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 Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and Universal Insurance go up and down completely randomly.

Pair Corralation between Gfl Environmental and Universal Insurance

Considering the 90-day investment horizon Gfl Environmental Holdings is expected to generate 0.68 times more return on investment than Universal Insurance. However, Gfl Environmental Holdings is 1.48 times less risky than Universal Insurance. It trades about -0.28 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.25 per unit of risk. If you would invest  4,484  in Gfl Environmental Holdings on October 26, 2024 and sell it today you would lose (247.00) from holding Gfl Environmental Holdings or give up 5.51% of portfolio value over 90 days.

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

Gfl Environmental Holdings  vs.  Universal Insurance Holdings

Gfl Environmental

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 5 (%) 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.

Universal Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Universal Insurance is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gfl Environmental and Universal Insurance

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

The idea behind Gfl Environmental Holdings and Universal Insurance Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.