Correlation Between Compass Diversified and Matthews International
Can any of the company-specific risk be diversified away by investing in both Compass Diversified and Matthews International 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 Matthews International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Diversified and Matthews International, you can compare the effects of market volatilities on Compass Diversified and Matthews International 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 Matthews International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Matthews International.
Diversification Opportunities for Compass Diversified and Matthews International
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Compass and Matthews is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and Matthews International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews International 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 are associated (or correlated) with Matthews International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews International has no effect on the direction of Compass Diversified i.e., Compass Diversified and Matthews International go up and down completely randomly.
Pair Corralation between Compass Diversified and Matthews International
Assuming the 90 days trading horizon Compass Diversified is expected to under-perform the Matthews International. But the preferred stock apears to be less risky and, when comparing its historical volatility, Compass Diversified is 5.95 times less risky than Matthews International. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Matthews International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,703 in Matthews International on November 2, 2024 and sell it today you would earn a total of 211.00 from holding Matthews International or generate 7.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Diversified vs. Matthews International
Performance |
| Timeline |
| Compass Diversified |
| Matthews International |
Compass Diversified and Matthews International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Diversified and Matthews International
The main advantage of trading using opposite Compass Diversified and Matthews International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified position performs unexpectedly, Matthews International 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 Matthews International will offset losses from the drop in Matthews International's long position.| Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Brookfield Business Partners | Compass Diversified vs. Matthews International | Compass Diversified vs. Tejon Ranch Co |
| Matthews International vs. Steel Partners Holdings | Matthews International vs. Compass Diversified | Matthews International vs. Brookfield Business Partners | Matthews International vs. Tejon Ranch Co |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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