Correlation Between Mueller Industries and CompoSecure
Can any of the company-specific risk be diversified away by investing in both Mueller Industries and CompoSecure 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 Mueller Industries and CompoSecure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mueller Industries and CompoSecure, you can compare the effects of market volatilities on Mueller Industries and CompoSecure 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 Mueller Industries with a short position of CompoSecure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mueller Industries and CompoSecure.
Diversification Opportunities for Mueller Industries and CompoSecure
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mueller and CompoSecure is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure and Mueller Industries 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 Mueller Industries are associated (or correlated) with CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Mueller Industries i.e., Mueller Industries and CompoSecure go up and down completely randomly.
Pair Corralation between Mueller Industries and CompoSecure
Considering the 90-day investment horizon Mueller Industries is expected to generate 33.93 times less return on investment than CompoSecure. But when comparing it to its historical volatility, Mueller Industries is 39.83 times less risky than CompoSecure. It trades about 0.1 of its potential returns per unit of risk. CompoSecure is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 65.00 in CompoSecure on August 28, 2024 and sell it today you would earn a total of 420.00 from holding CompoSecure or generate 646.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.09% |
| Values | Daily Returns |
Mueller Industries vs. CompoSecure
Performance |
| Timeline |
| Mueller Industries |
| CompoSecure |
Mueller Industries and CompoSecure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mueller Industries and CompoSecure
The main advantage of trading using opposite Mueller Industries and CompoSecure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mueller Industries position performs unexpectedly, CompoSecure 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 CompoSecure will offset losses from the drop in CompoSecure's long position.| Mueller Industries vs. Insteel Industries | Mueller Industries vs. Carpenter Technology | Mueller Industries vs. Haynes International | Mueller Industries vs. Northwest Pipe |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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