Correlation Between Compass Group and Zanaga Iron
Can any of the company-specific risk be diversified away by investing in both Compass Group and Zanaga Iron 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 Zanaga Iron 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 Zanaga Iron Ore, you can compare the effects of market volatilities on Compass Group and Zanaga Iron 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 Zanaga Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Zanaga Iron.
Diversification Opportunities for Compass Group and Zanaga Iron
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Compass and Zanaga is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Zanaga Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zanaga Iron Ore 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 Zanaga Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zanaga Iron Ore has no effect on the direction of Compass Group i.e., Compass Group and Zanaga Iron go up and down completely randomly.
Pair Corralation between Compass Group and Zanaga Iron
Assuming the 90 days trading horizon Compass Group PLC is expected to generate 0.2 times more return on investment than Zanaga Iron. However, Compass Group PLC is 5.01 times less risky than Zanaga Iron. It trades about 0.13 of its potential returns per unit of risk. Zanaga Iron Ore is currently generating about -0.03 per unit of risk. If you would invest 200,208 in Compass Group PLC on August 29, 2024 and sell it today you would earn a total of 67,792 from holding Compass Group PLC or generate 33.86% 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. Zanaga Iron Ore
Performance |
| Timeline |
| Compass Group PLC |
| Zanaga Iron Ore |
Compass Group and Zanaga Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Zanaga Iron
The main advantage of trading using opposite Compass Group and Zanaga Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, Zanaga Iron 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 Zanaga Iron will offset losses from the drop in Zanaga Iron's long position.| Compass Group vs. Fresenius Medical Care | Compass Group vs. Albion Technology General | Compass Group vs. DXC Technology Co | Compass Group vs. Monster Beverage Corp |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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