Correlation Between Compass Group and Warehouse REIT
Can any of the company-specific risk be diversified away by investing in both Compass Group and Warehouse REIT 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 Warehouse REIT 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 Warehouse REIT plc, you can compare the effects of market volatilities on Compass Group and Warehouse REIT 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 Warehouse REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Warehouse REIT.
Diversification Opportunities for Compass Group and Warehouse REIT
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Compass and Warehouse is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Warehouse REIT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warehouse REIT 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 Warehouse REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warehouse REIT plc has no effect on the direction of Compass Group i.e., Compass Group and Warehouse REIT go up and down completely randomly.
Pair Corralation between Compass Group and Warehouse REIT
Assuming the 90 days trading horizon Compass Group PLC is expected to generate 0.55 times more return on investment than Warehouse REIT. However, Compass Group PLC is 1.81 times less risky than Warehouse REIT. It trades about 0.08 of its potential returns per unit of risk. Warehouse REIT plc is currently generating about -0.02 per unit of risk. If you would invest 198,946 in Compass Group PLC on November 28, 2024 and sell it today you would earn a total of 79,154 from holding Compass Group PLC or generate 39.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Compass Group PLC vs. Warehouse REIT plc
Performance |
| Timeline |
| Compass Group PLC |
| Warehouse REIT plc |
Compass Group and Warehouse REIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Warehouse REIT
The main advantage of trading using opposite Compass Group and Warehouse REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, Warehouse REIT 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 Warehouse REIT will offset losses from the drop in Warehouse REIT's long position.| Compass Group vs. Wizz Air Holdings | Compass Group vs. United States Steel | Compass Group vs. Baker Steel Resources | Compass Group vs. LPKF Laser Electronics |
| Warehouse REIT vs. Derwent London PLC | Warehouse REIT vs. Hammerson PLC | Warehouse REIT vs. Supermarket Income REIT | Warehouse REIT vs. Workspace Group PLC |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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