To make it clear how AW/iP GPS works:
Apple Watch talks to iPhone through BT and WiFi* (*not directly like BT, it talks through known WiFi network).
So if You want GPS from Your watch, You have to disable BT and WiFi on any of them.
When You are far from home, You just need to turn off BT on AW or iP. But when You are near Your home when You start Your workout, then its best to disable them both. Why? For example, when I'm near my home and have BT off on AW or my iP they both connect to my strong WiFi network and my GPS fix is from my iPhone. Then after riding 50m my WiFi disconnects and AW is switching to it's GPS, because it cannot talk to my iPhone anymore. The problem is, that AW is now trying to get a FIX while im riding and this is the time when you get those +- distances and incorrect data.
So to be sure - red X phone icon on the Apple Watch Guarantees Your GPS is from Your Watch.
The same is with cellular bars - when You see them, Your GPS is from Your Watch.
This is how I would expect it to work, and is probably how it does work these days, but in the past I have switched both the bluetooth and the WiFi off on the watch and the watch has still been using the phone's GPS.
This was reported by several users and I confirmed it by switching WiFi and Bluetooth off and then waiting a while before switching off the iPhone completely. Only then would the GPS signal drop for a few seconds and then recover. This was a couple of years ago though so may have been a bug that has since been fixed. I couldn't reproduce it now.
It may be that it only happened if the GPS connection was already established before switching the radios off, but I didn't test that at the time.
I have also seen variation over the years in how airplane mode works on the watch in that it sometimes prevented the iPhone GPS from being used and sometimes it did not.
This is why I don't like to recommend what people should do to force the watch to use its own GPS: because it has changed over the years, and any such advice could be out of date if it changes again.
Switching off the bluetooth on the phone has always worked, but the only guaranteed way to ensure it is to switch off the iPhone completely. So I usually recommend that when testing to see if the iPhone GPS is the cause of any problems. It is obviously not a long term fix because people usually bring their iPhone for a reason, but it is the best way to diagnose the cause when your GPS is poor and you suspect the iPhone.
I just wish that Apple would allow apps to choose where the GPS comes from because it has always been one of the most confusing issues for both users and developers. If they are worried about battery usage then force apps to display some sort of disclaimer when using the watch GPS when the iPhone is connected.
I am sure that they have their reasons but, in typical Apple fashion, they will probably never explain them.