Correlation Between Compass Diversified and Flexible Solutions
Can any of the company-specific risk be diversified away by investing in both Compass Diversified and Flexible Solutions 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 Diversified and Flexible Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Diversified Holdings and Flexible Solutions International, you can compare the effects of market volatilities on Compass Diversified and Flexible Solutions 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 Diversified with a short position of Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Flexible Solutions.
Diversification Opportunities for Compass Diversified and Flexible Solutions
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Compass and Flexible is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions and Compass Diversified 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 Diversified Holdings are associated (or correlated) with Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Compass Diversified i.e., Compass Diversified and Flexible Solutions go up and down completely randomly.
Pair Corralation between Compass Diversified and Flexible Solutions
Assuming the 90 days trading horizon Compass Diversified is expected to generate 10.41 times less return on investment than Flexible Solutions. But when comparing it to its historical volatility, Compass Diversified Holdings is 9.44 times less risky than Flexible Solutions. It trades about 0.13 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 405.00 in Flexible Solutions International on October 28, 2024 and sell it today you would earn a total of 196.00 from holding Flexible Solutions International or generate 48.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Diversified Holdings vs. Flexible Solutions Internation
Performance |
| Timeline |
| Compass Diversified |
| Flexible Solutions |
Compass Diversified and Flexible Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Diversified and Flexible Solutions
The main advantage of trading using opposite Compass Diversified and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified position performs unexpectedly, Flexible Solutions 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.| Compass Diversified vs. Legacy Education | Compass Diversified vs. NVIDIA | Compass Diversified vs. Apple Inc | Compass Diversified vs. Microsoft |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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