Correlation Between Compass Group and Rave Restaurant
Can any of the company-specific risk be diversified away by investing in both Compass Group and Rave Restaurant 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 Rave Restaurant 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 Rave Restaurant Group, you can compare the effects of market volatilities on Compass Group and Rave Restaurant 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 Rave Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Rave Restaurant.
Diversification Opportunities for Compass Group and Rave Restaurant
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compass and Rave is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group 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 Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Compass Group i.e., Compass Group and Rave Restaurant go up and down completely randomly.
Pair Corralation between Compass Group and Rave Restaurant
Assuming the 90 days horizon Compass Group is expected to generate 3.22 times less return on investment than Rave Restaurant. But when comparing it to its historical volatility, Compass Group PLC is 2.49 times less risky than Rave Restaurant. It trades about 0.2 of its potential returns per unit of risk. Rave Restaurant Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 266.00 in Rave Restaurant Group on September 13, 2024 and sell it today you would earn a total of 39.00 from holding Rave Restaurant Group or generate 14.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. Rave Restaurant Group
Performance |
| Timeline |
| Compass Group PLC |
| Rave Restaurant Group |
Compass Group and Rave Restaurant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Rave Restaurant
The main advantage of trading using opposite Compass Group and Rave Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, Rave Restaurant 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 Rave Restaurant will offset losses from the drop in Rave Restaurant's long position.| Compass Group vs. Bunzl plc | Compass Group vs. Associated British Foods | Compass Group vs. Coloplast A | Compass Group vs. Experian plc PK |
| Rave Restaurant vs. Ark Restaurants Corp | Rave Restaurant vs. One Group Hospitality | Rave Restaurant vs. Flanigans Enterprises | Rave Restaurant vs. Noble Romans |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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