Correlation Between Gfl Environmental and Montrose Environmental

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

Diversification Opportunities for Gfl Environmental and Montrose Environmental

-0.31

Correlation Coefficient

Gfl Environmental  Montrose Environmental

Very good diversification

The 3 months correlation between Gfl and Montrose is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gfl Environmental Holdings and Montrose Environmental Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montrose Environmental 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 Montrose Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montrose Environmental has no effect on the direction of Gfl Environmental i.e., Gfl Environmental and Montrose Environmental go up and down completely randomly.

Pair Corralation between Gfl Environmental and Montrose Environmental

Considering the 90-day investment horizon Gfl Environmental Holdings is expected to generate 0.33 times more return on investment than Montrose Environmental. However, Gfl Environmental Holdings is 3.07 times less risky than Montrose Environmental. It trades about 0.08 of its potential returns per unit of risk. Montrose Environmental Grp is currently generating about -0.17 per unit of risk. If you would invest  4,262  in Gfl Environmental Holdings on August 24, 2024 and sell it today you would earn a total of  315.00  from holding Gfl Environmental Holdings or generate 7.39% return on investment over 90 days.

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

Gfl Environmental Holdings  vs.  Montrose Environmental Grp

Gfl Environmental

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Gfl Environmental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Montrose Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montrose Environmental Grp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gfl Environmental and Montrose Environmental

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

The idea behind Gfl Environmental Holdings and Montrose Environmental Grp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.