Correlation Between Compass Group and LBG Media
Can any of the company-specific risk be diversified away by investing in both Compass Group and LBG Media 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 LBG Media 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 LBG Media PLC, you can compare the effects of market volatilities on Compass Group and LBG Media 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 LBG Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and LBG Media.
Diversification Opportunities for Compass Group and LBG Media
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Compass and LBG is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media PLC 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 LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of Compass Group i.e., Compass Group and LBG Media go up and down completely randomly.
Pair Corralation between Compass Group and LBG Media
Assuming the 90 days trading horizon Compass Group PLC is expected to generate 0.61 times more return on investment than LBG Media. However, Compass Group PLC is 1.64 times less risky than LBG Media. It trades about 0.19 of its potential returns per unit of risk. LBG Media PLC is currently generating about -0.22 per unit of risk. If you would invest 264,671 in Compass Group PLC on November 2, 2024 and sell it today you would earn a total of 11,529 from holding Compass Group PLC or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. LBG Media PLC
Performance |
| Timeline |
| Compass Group PLC |
| LBG Media PLC |
Compass Group and LBG Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and LBG Media
The main advantage of trading using opposite Compass Group and LBG Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, LBG Media 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 LBG Media will offset losses from the drop in LBG Media's long position.| Compass Group vs. Public Storage | Compass Group vs. Supermarket Income REIT | Compass Group vs. MoneysupermarketCom Group PLC | Compass Group vs. Premier Foods PLC |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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