Correlation Between Compass Group and ZA
Can any of the company-specific risk be diversified away by investing in both Compass Group and ZA 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 ZA 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 ZA Group, you can compare the effects of market volatilities on Compass Group and ZA 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 ZA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and ZA.
Diversification Opportunities for Compass Group and ZA
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Compass and ZA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and ZA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZA 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 ZA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZA Group has no effect on the direction of Compass Group i.e., Compass Group and ZA go up and down completely randomly.
Pair Corralation between Compass Group and ZA
Assuming the 90 days horizon Compass Group is expected to generate 553.67 times less return on investment than ZA. But when comparing it to its historical volatility, Compass Group PLC is 193.14 times less risky than ZA. It trades about 0.07 of its potential returns per unit of risk. ZA Group is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.00 in ZA Group on September 1, 2024 and sell it today you would earn a total of 0.01 from holding ZA Group or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. ZA Group
Performance |
| Timeline |
| Compass Group PLC |
| ZA Group |
Compass Group and ZA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and ZA
The main advantage of trading using opposite Compass Group and ZA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, ZA 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 ZA will offset losses from the drop in ZA'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 |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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