Correlation Between Compass Group and Fairwood Holdings
Can any of the company-specific risk be diversified away by investing in both Compass Group and Fairwood Holdings 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 Fairwood Holdings 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 Fairwood Holdings Limited, you can compare the effects of market volatilities on Compass Group and Fairwood Holdings 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 Fairwood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Fairwood Holdings.
Diversification Opportunities for Compass Group and Fairwood Holdings
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Compass and Fairwood is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Fairwood Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairwood Holdings 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 Fairwood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairwood Holdings has no effect on the direction of Compass Group i.e., Compass Group and Fairwood Holdings go up and down completely randomly.
Pair Corralation between Compass Group and Fairwood Holdings
Assuming the 90 days horizon Compass Group PLC is expected to generate 0.27 times more return on investment than Fairwood Holdings. However, Compass Group PLC is 3.66 times less risky than Fairwood Holdings. It trades about 0.13 of its potential returns per unit of risk. Fairwood Holdings Limited is currently generating about 0.01 per unit of risk. If you would invest 2,542 in Compass Group PLC on September 3, 2024 and sell it today you would earn a total of 915.00 from holding Compass Group PLC or generate 36.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. Fairwood Holdings Limited
Performance |
| Timeline |
| Compass Group PLC |
| Fairwood Holdings |
Compass Group and Fairwood Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Fairwood Holdings
The main advantage of trading using opposite Compass Group and Fairwood Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, Fairwood Holdings 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 Fairwood Holdings will offset losses from the drop in Fairwood Holdings' long position.| Compass Group vs. Bunzl plc | Compass Group vs. Associated British Foods | Compass Group vs. Coloplast A | Compass Group vs. Experian plc PK |
| Fairwood Holdings vs. Fidus Investment Corp | Fairwood Holdings vs. Dave Busters Entertainment | Fairwood Holdings vs. Socket Mobile | Fairwood Holdings vs. RCS MediaGroup SpA |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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