Correlation Between Wex and Gfl Environmental

Can any of the company-specific risk be diversified away by investing in both Wex and Gfl Environmental 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 Wex and Gfl Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wex Inc and Gfl Environmental Holdings, you can compare the effects of market volatilities on Wex and Gfl Environmental 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 Wex with a short position of Gfl Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wex and Gfl Environmental.

Diversification Opportunities for Wex and Gfl Environmental

-0.8

Correlation Coefficient

Wex  Gfl Environmental

Pay attention - limited upside

The 3 months correlation between Wex and Gfl is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Wex Inc and Gfl Environmental Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gfl Environmental and Wex 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 Wex Inc are associated (or correlated) with Gfl Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gfl Environmental has no effect on the direction of Wex i.e., Wex and Gfl Environmental go up and down completely randomly.

Pair Corralation between Wex and Gfl Environmental

Considering the 90-day investment horizon Wex Inc is expected to under-perform the Gfl Environmental. In addition to that, Wex is 1.86 times more volatile than Gfl Environmental Holdings. It trades about -0.05 of its total potential returns per unit of risk. Gfl Environmental Holdings is currently generating about 0.09 per unit of volatility. If you would invest  4,483  in Gfl Environmental Holdings on December 26, 2024 and sell it today you would earn a total of  379.00  from holding Gfl Environmental Holdings or generate 8.45% return on investment over 90 days.

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

Wex Inc  vs.  Gfl Environmental Holdings

Wex Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wex Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Gfl Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 7 (%) 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 April 2025.

Pair Trading with Wex and Gfl Environmental

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

The idea behind Wex Inc and Gfl Environmental 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.