Correlation Between GFL ENVIRONM and China Communications
Can any of the company-specific risk be diversified away by investing in both GFL ENVIRONM and China Communications 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 ENVIRONM and China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GFL ENVIRONM and China Communications Construction, you can compare the effects of market volatilities on GFL ENVIRONM and China Communications 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 ENVIRONM with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of GFL ENVIRONM and China Communications.
Diversification Opportunities for GFL ENVIRONM and China Communications
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GFL and China is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GFL ENVIRONM and China Communications Construct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and GFL ENVIRONM 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 ENVIRONM are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of GFL ENVIRONM i.e., GFL ENVIRONM and China Communications go up and down completely randomly.
Pair Corralation between GFL ENVIRONM and China Communications
Assuming the 90 days horizon GFL ENVIRONM is expected to generate 4.49 times less return on investment than China Communications. But when comparing it to its historical volatility, GFL ENVIRONM is 3.87 times less risky than China Communications. It trades about 0.06 of its potential returns per unit of risk. China Communications Construction is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11.00 in China Communications Construction on September 3, 2024 and sell it today you would earn a total of 50.00 from holding China Communications Construction or generate 454.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GFL ENVIRONM vs. China Communications Construct
Performance |
| Timeline |
| GFL ENVIRONM |
| China Communications |
GFL ENVIRONM and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GFL ENVIRONM and China Communications
The main advantage of trading using opposite GFL ENVIRONM and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GFL ENVIRONM position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.| GFL ENVIRONM vs. TIANDE CHEMICAL | GFL ENVIRONM vs. PennyMac Mortgage Investment | GFL ENVIRONM vs. KINGBOARD CHEMICAL | GFL ENVIRONM vs. SEI INVESTMENTS |
| China Communications vs. ALGOMA STEEL GROUP | China Communications vs. GFL ENVIRONM | China Communications vs. Astral Foods Limited | China Communications vs. CosmoSteel Holdings Limited |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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