Correlation Between Compass Group and Auction Technology
Can any of the company-specific risk be diversified away by investing in both Compass Group and Auction Technology 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 Auction Technology 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 Auction Technology Group, you can compare the effects of market volatilities on Compass Group and Auction Technology 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 Auction Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Auction Technology.
Diversification Opportunities for Compass Group and Auction Technology
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Compass and Auction is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology 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 Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of Compass Group i.e., Compass Group and Auction Technology go up and down completely randomly.
Pair Corralation between Compass Group and Auction Technology
Assuming the 90 days trading horizon Compass Group PLC is expected to generate 0.33 times more return on investment than Auction Technology. However, Compass Group PLC is 3.06 times less risky than Auction Technology. It trades about 0.08 of its potential returns per unit of risk. Auction Technology Group is currently generating about -0.01 per unit of risk. If you would invest 205,220 in Compass Group PLC on September 12, 2024 and sell it today you would earn a total of 62,880 from holding Compass Group PLC or generate 30.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.72% |
| Values | Daily Returns |
Compass Group PLC vs. Auction Technology Group
Performance |
| Timeline |
| Compass Group PLC |
| Auction Technology |
Compass Group and Auction Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Auction Technology
The main advantage of trading using opposite Compass Group and Auction Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, Auction Technology 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 Auction Technology will offset losses from the drop in Auction Technology's long position.| Compass Group vs. Auction Technology Group | Compass Group vs. Take Two Interactive Software | Compass Group vs. Cognizant Technology Solutions | Compass Group vs. Litigation Capital Management |
| Auction Technology vs. Home Depot | Auction Technology vs. Chrysalis Investments | Auction Technology vs. Neometals | Auction Technology vs. Coor Service Management |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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