Correlation Between Flexible Solutions and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both Flexible Solutions and Compass Diversified 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 Flexible Solutions and Compass Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flexible Solutions International and Compass Diversified Holdings, you can compare the effects of market volatilities on Flexible Solutions and Compass Diversified 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 Flexible Solutions with a short position of Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flexible Solutions and Compass Diversified.
Diversification Opportunities for Flexible Solutions and Compass Diversified
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Flexible and Compass is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and Flexible Solutions 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 Flexible Solutions International are associated (or correlated) with Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Flexible Solutions i.e., Flexible Solutions and Compass Diversified go up and down completely randomly.
Pair Corralation between Flexible Solutions and Compass Diversified
Considering the 90-day investment horizon Flexible Solutions International is expected to generate 9.44 times more return on investment than Compass Diversified. However, Flexible Solutions is 9.44 times more volatile than Compass Diversified Holdings. It trades about 0.15 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about 0.13 per unit of risk. If you would invest 405.00 in Flexible Solutions International on October 28, 2024 and sell it today you would earn a total of 196.00 from holding Flexible Solutions International or generate 48.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flexible Solutions Internation vs. Compass Diversified Holdings
Performance |
| Timeline |
| Flexible Solutions |
| Compass Diversified |
Flexible Solutions and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flexible Solutions and Compass Diversified
The main advantage of trading using opposite Flexible Solutions and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified's long position.| Flexible Solutions vs. Orion Engineered Carbons | Flexible Solutions vs. International Flavors Fragrances | Flexible Solutions vs. Sociedad Quimica y | Flexible Solutions vs. Albemarle Corp |
| Compass Diversified vs. Legacy Education | Compass Diversified vs. NVIDIA | Compass Diversified vs. Apple Inc | Compass Diversified vs. Microsoft |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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