Correlation Between Compass Group and Ark Restaurants
Can any of the company-specific risk be diversified away by investing in both Compass Group and Ark Restaurants 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 Group and Ark Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Group PLC and Ark Restaurants Corp, you can compare the effects of market volatilities on Compass Group and Ark Restaurants 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 Group with a short position of Ark Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Ark Restaurants.
Diversification Opportunities for Compass Group and Ark Restaurants
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Compass and Ark is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp and Compass Group 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 Group PLC are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Compass Group i.e., Compass Group and Ark Restaurants go up and down completely randomly.
Pair Corralation between Compass Group and Ark Restaurants
Assuming the 90 days horizon Compass Group is expected to generate 5.76 times less return on investment than Ark Restaurants. But when comparing it to its historical volatility, Compass Group PLC is 6.48 times less risky than Ark Restaurants. It trades about 0.2 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,038 in Ark Restaurants Corp on September 13, 2024 and sell it today you would earn a total of 247.00 from holding Ark Restaurants Corp or generate 23.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. Ark Restaurants Corp
Performance |
| Timeline |
| Compass Group PLC |
| Ark Restaurants Corp |
Compass Group and Ark Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Ark Restaurants
The main advantage of trading using opposite Compass Group and Ark Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, Ark Restaurants 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 Ark Restaurants will offset losses from the drop in Ark Restaurants' long position.| Compass Group vs. Bunzl plc | Compass Group vs. Associated British Foods | Compass Group vs. Coloplast A | Compass Group vs. Experian plc PK |
| Ark Restaurants vs. Nathans Famous | Ark Restaurants vs. Flanigans Enterprises | Ark Restaurants vs. Good Times Restaurants | Ark Restaurants vs. Auburn National Bancorporation |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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