Correlation Between Compass Diversified and Brookfield Business
Can any of the company-specific risk be diversified away by investing in both Compass Diversified and Brookfield Business 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 Brookfield Business 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 Brookfield Business Partners, you can compare the effects of market volatilities on Compass Diversified and Brookfield Business 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 Brookfield Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Brookfield Business.
Diversification Opportunities for Compass Diversified and Brookfield Business
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compass and Brookfield is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Brookfield Business Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business 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 Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business has no effect on the direction of Compass Diversified i.e., Compass Diversified and Brookfield Business go up and down completely randomly.
Pair Corralation between Compass Diversified and Brookfield Business
Given the investment horizon of 90 days Compass Diversified is expected to generate 1.29 times less return on investment than Brookfield Business. In addition to that, Compass Diversified is 1.14 times more volatile than Brookfield Business Partners. It trades about 0.26 of its total potential returns per unit of risk. Brookfield Business Partners is currently generating about 0.38 per unit of volatility. If you would invest 2,152 in Brookfield Business Partners on August 28, 2024 and sell it today you would earn a total of 364.00 from holding Brookfield Business Partners or generate 16.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Diversified Holdings vs. Brookfield Business Partners
Performance |
| Timeline |
| Compass Diversified |
| Brookfield Business |
Compass Diversified and Brookfield Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Diversified and Brookfield Business
The main advantage of trading using opposite Compass Diversified and Brookfield Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified position performs unexpectedly, Brookfield Business 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 Brookfield Business will offset losses from the drop in Brookfield Business' long position.| Compass Diversified vs. Matthews International | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Valmont Industries | Compass Diversified vs. Brookfield Business Partners |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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