Correlation Between Litigation Capital and Compass Group
Can any of the company-specific risk be diversified away by investing in both Litigation Capital and Compass 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 Litigation Capital and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Litigation Capital Management and Compass Group PLC, you can compare the effects of market volatilities on Litigation Capital and Compass 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 Litigation Capital with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litigation Capital and Compass Group.
Diversification Opportunities for Litigation Capital and Compass Group
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Litigation and Compass is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Litigation Capital Management and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Litigation Capital 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 Litigation Capital Management are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Litigation Capital i.e., Litigation Capital and Compass Group go up and down completely randomly.
Pair Corralation between Litigation Capital and Compass Group
Assuming the 90 days trading horizon Litigation Capital Management is expected to under-perform the Compass Group. In addition to that, Litigation Capital is 2.18 times more volatile than Compass Group PLC. It trades about -0.22 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.21 per unit of volatility. If you would invest 261,200 in Compass Group PLC on September 13, 2024 and sell it today you would earn a total of 9,700 from holding Compass Group PLC or generate 3.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Litigation Capital Management vs. Compass Group PLC
Performance |
| Timeline |
| Litigation Capital |
| Compass Group PLC |
Litigation Capital and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Litigation Capital and Compass Group
The main advantage of trading using opposite Litigation Capital and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litigation Capital position performs unexpectedly, Compass 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 Compass Group will offset losses from the drop in Compass Group's long position.| Litigation Capital vs. Intuitive Investments Group | Litigation Capital vs. Universal Display Corp | Litigation Capital vs. Batm Advanced Communications | Litigation Capital vs. Arrow Electronics |
| Compass Group vs. Berkshire Hathaway | Compass Group vs. Hyundai Motor | Compass Group vs. Samsung Electronics Co | Compass Group vs. Samsung Electronics Co |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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