Correlation Between Associated British and Compass Group
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Compass Group PLC, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Compass Group.
Diversification Opportunities for Associated British and Compass Group
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Associated and Compass is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods 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 Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Compass Group go up and down completely randomly.
Pair Corralation between Associated British and Compass Group
Assuming the 90 days horizon Associated British Foods is expected to under-perform the Compass Group. In addition to that, Associated British is 1.72 times more volatile than Compass Group PLC. It trades about 0.0 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.11 per unit of volatility. If you would invest 2,722 in Compass Group PLC on August 27, 2024 and sell it today you would earn a total of 618.00 from holding Compass Group PLC or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Compass Group PLC
Performance |
| Timeline |
| Associated British Foods |
| Compass Group PLC |
Associated British and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Compass Group
The main advantage of trading using opposite Associated British and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Artisan Consumer Goods | Associated British vs. The A2 Milk | Associated British vs. BioAdaptives | Associated British vs. General Mills |
| Compass Group vs. Bunzl plc | Compass Group vs. Associated British Foods | Compass Group vs. Coloplast A | Compass Group vs. Experian plc PK |
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 Stocks Directory module to find actively traded stocks across global markets.
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