Correlation Between Gfl Environmental and Nippon Steel

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

Diversification Opportunities for Gfl Environmental and Nippon Steel

0.52

Correlation Coefficient

Gfl Environmental  Nippon Steel

Very weak diversification

The 3 months correlation between Gfl and Nippon is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel Corp has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and Nippon Steel go up and down completely randomly.

Pair Corralation between Gfl Environmental and Nippon Steel

Considering the 90-day investment horizon Gfl Environmental Holdings is expected to generate 1.11 times more return on investment than Nippon Steel. However, Gfl Environmental is 1.11 times more volatile than Nippon Steel Corp. It trades about -0.25 of its potential returns per unit of risk. Nippon Steel Corp is currently generating about -0.33 per unit of risk. If you would invest  3,456  in Gfl Environmental Holdings on January 29, 2024 and sell it today you would lose (251.00) from holding Gfl Environmental Holdings or give up 7.26% of portfolio value over 90 days.

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

Gfl Environmental Holdings  vs.  Nippon Steel Corp

Gfl Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gfl Environmental Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Nippon Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gfl Environmental and Nippon Steel

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

The idea behind Gfl Environmental Holdings and Nippon Steel Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.