Correlation Between Guangdong Investment and GFL Environmental

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Can any of the company-specific risk be diversified away by investing in both Guangdong Investment 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 Guangdong Investment and GFL Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and GFL Environmental, you can compare the effects of market volatilities on Guangdong Investment 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 Guangdong Investment with a short position of GFL Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and GFL Environmental.

Diversification Opportunities for Guangdong Investment and GFL Environmental

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Guangdong and GFL is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and GFL Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFL Environmental and Guangdong Investment 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 Guangdong Investment Limited 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 Guangdong Investment i.e., Guangdong Investment and GFL Environmental go up and down completely randomly.

Pair Corralation between Guangdong Investment and GFL Environmental

If you would invest  67.00  in Guangdong Investment Limited on September 14, 2024 and sell it today you would earn a total of  16.00  from holding Guangdong Investment Limited or generate 23.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy0.4%
ValuesDaily Returns

Guangdong Investment Limited  vs.  GFL Environmental

 Performance 
       Timeline  
Guangdong Investment 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.
GFL Environmental 

Risk-Adjusted Performance

0 of 100

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

Guangdong Investment and GFL Environmental Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangdong Investment and GFL Environmental

The main advantage of trading using opposite Guangdong Investment and GFL Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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 Guangdong Investment Limited and GFL Environmental 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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