Correlation Between Compass Minerals and Materion
Can any of the company-specific risk be diversified away by investing in both Compass Minerals and Materion 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 Compass Minerals and Materion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Minerals International and Materion, you can compare the effects of market volatilities on Compass Minerals and Materion 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 Compass Minerals with a short position of Materion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Minerals and Materion.
Diversification Opportunities for Compass Minerals and Materion
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Compass and Materion is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Compass Minerals International and Materion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materion and Compass Minerals 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 Compass Minerals International are associated (or correlated) with Materion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materion has no effect on the direction of Compass Minerals i.e., Compass Minerals and Materion go up and down completely randomly.
Pair Corralation between Compass Minerals and Materion
Considering the 90-day investment horizon Compass Minerals is expected to generate 1.15 times less return on investment than Materion. In addition to that, Compass Minerals is 2.02 times more volatile than Materion. It trades about 0.1 of its total potential returns per unit of risk. Materion is currently generating about 0.22 per unit of volatility. If you would invest 10,446 in Materion on August 28, 2024 and sell it today you would earn a total of 1,423 from holding Materion or generate 13.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Compass Minerals International vs. Materion
Performance |
| Timeline |
| Compass Minerals Int |
| Materion |
Compass Minerals and Materion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Minerals and Materion
The main advantage of trading using opposite Compass Minerals and Materion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Minerals position performs unexpectedly, Materion 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 Materion will offset losses from the drop in Materion's long position.| Compass Minerals vs. Vale SA ADR | Compass Minerals vs. Teck Resources Ltd | Compass Minerals vs. BHP Group Limited | Compass Minerals vs. Glencore PLC ADR |
| Materion vs. Skeena Resources | Materion vs. Compass Minerals International | Materion vs. IperionX Limited American | Materion vs. EMX Royalty Corp |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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