Correlation Between Compass Group and Pensionbee Group
Can any of the company-specific risk be diversified away by investing in both Compass Group and Pensionbee Group 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 Pensionbee Group 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 Pensionbee Group PLC, you can compare the effects of market volatilities on Compass Group and Pensionbee Group 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 Pensionbee Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Pensionbee Group.
Diversification Opportunities for Compass Group and Pensionbee Group
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Compass and Pensionbee is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Pensionbee Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pensionbee Group 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 Pensionbee Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pensionbee Group PLC has no effect on the direction of Compass Group i.e., Compass Group and Pensionbee Group go up and down completely randomly.
Pair Corralation between Compass Group and Pensionbee Group
Assuming the 90 days trading horizon Compass Group is expected to generate 3.34 times less return on investment than Pensionbee Group. But when comparing it to its historical volatility, Compass Group PLC is 3.16 times less risky than Pensionbee Group. It trades about 0.08 of its potential returns per unit of risk. Pensionbee Group PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,410 in Pensionbee Group PLC on September 14, 2024 and sell it today you would earn a total of 10,340 from holding Pensionbee Group PLC or generate 191.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. Pensionbee Group PLC
Performance |
| Timeline |
| Compass Group PLC |
| Pensionbee Group PLC |
Compass Group and Pensionbee Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Pensionbee Group
The main advantage of trading using opposite Compass Group and Pensionbee Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, Pensionbee Group 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 Pensionbee Group will offset losses from the drop in Pensionbee Group's long position.| Compass Group vs. GoldMining | Compass Group vs. Fortune Brands Home | Compass Group vs. Hochschild Mining plc | Compass Group vs. Young Cos Brewery |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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