Correlation Between Cairo Communication and Compass Group
Can any of the company-specific risk be diversified away by investing in both Cairo Communication and Compass Group 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 Cairo Communication and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cairo Communication SpA and Compass Group PLC, you can compare the effects of market volatilities on Cairo Communication and Compass Group 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 Cairo Communication with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairo Communication and Compass Group.
Diversification Opportunities for Cairo Communication and Compass Group
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cairo and Compass is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Cairo Communication 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 Cairo Communication SpA are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Cairo Communication i.e., Cairo Communication and Compass Group go up and down completely randomly.
Pair Corralation between Cairo Communication and Compass Group
Assuming the 90 days trading horizon Cairo Communication is expected to generate 1.61 times less return on investment than Compass Group. In addition to that, Cairo Communication is 2.04 times more volatile than Compass Group PLC. It trades about 0.09 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.3 per unit of volatility. If you would invest 251,100 in Compass Group PLC on August 26, 2024 and sell it today you would earn a total of 13,800 from holding Compass Group PLC or generate 5.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairo Communication SpA vs. Compass Group PLC
Performance |
| Timeline |
| Cairo Communication SpA |
| Compass Group PLC |
Cairo Communication and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairo Communication and Compass Group
The main advantage of trading using opposite Cairo Communication and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairo Communication position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group's long position.| Cairo Communication vs. Samsung Electronics Co | Cairo Communication vs. Samsung Electronics Co | Cairo Communication vs. Hyundai Motor | Cairo Communication vs. Toyota Motor Corp |
| Compass Group vs. Spirent Communications plc | Compass Group vs. United Internet AG | Compass Group vs. Cairo Communication SpA | Compass Group vs. Grand Vision Media |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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