Correlation Between Compass Diversified and Old Republic
Can any of the company-specific risk be diversified away by investing in both Compass Diversified and Old Republic 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 Old Republic 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 Old Republic International, you can compare the effects of market volatilities on Compass Diversified and Old Republic 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 Old Republic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Old Republic.
Diversification Opportunities for Compass Diversified and Old Republic
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Compass and Old is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of Compass Diversified i.e., Compass Diversified and Old Republic go up and down completely randomly.
Pair Corralation between Compass Diversified and Old Republic
Assuming the 90 days trading horizon Compass Diversified is expected to generate 195.0 times less return on investment than Old Republic. But when comparing it to its historical volatility, Compass Diversified Holdings is 1.04 times less risky than Old Republic. It trades about 0.0 of its potential returns per unit of risk. Old Republic International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,322 in Old Republic International on October 28, 2024 and sell it today you would earn a total of 1,300 from holding Old Republic International or generate 55.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Compass Diversified Holdings vs. Old Republic International
Performance |
| Timeline |
| Compass Diversified |
| Old Republic Interna |
Compass Diversified and Old Republic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Diversified and Old Republic
The main advantage of trading using opposite Compass Diversified and Old Republic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified position performs unexpectedly, Old Republic 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 Old Republic will offset losses from the drop in Old Republic's long position.| Compass Diversified vs. Legacy Education | Compass Diversified vs. NVIDIA | Compass Diversified vs. Apple Inc | Compass Diversified vs. Microsoft |
| Old Republic vs. Axa Equitable Holdings | Old Republic vs. American International Group | Old Republic vs. Arch Capital Group | Old Republic vs. Sun Life Financial |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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